In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling : Eu and National Developments in the Regulation of Gambling [1 ed.] 9789004215825, 9789004192461

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In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling Edited by

Alan Littler Nele Hoekx Cyrille Fijnaut and Alain-Laurent Verbeke

LEIDEN • BOSTON 2011

This book is printed on acid-free paper.

Library of Congress Cataloging-in-Publication Data In the shadow of Luxembourg : EU and national developments in the regulation of gambling / Edited by Alan Littler ... et al. p. cm. Includes index. “With the aid of the Belgian Gaming Commission, the Belgian National Lottery, and the Dutch State Lottery, an international colloquium was organised in Leuven on 10 November 2009”--CIP galley. ISBN 978-90-04-19246-1 (hardback : alk. paper) 1. Gambling--Law and legislation--European Union countries--Congresses. 2. Gambling--Government policy--European Union countries--Congresses. I. Littler, Alan. KJE6065.G35.I5 2011 344.24’099--dc22 2010051347

ISBN 978 90 04 19246 1 Copyright 2011 by Koninklijke Brill NV, Leiden, The Netherlands. Koninklijke Brill NV incorporates the imprints Brill, Hotei Publishing, IDC Publishers, Martinus Nijhoff Publishers and VSP. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorisation to photocopy items for internal or personal use is granted by Koninklijke Brill NV provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers MA 01923, USA. Fees are subject to change.

Contents

Foreword General Introduction Cyrille Fijnaut 1. The Aim and Programme of the Symposium 2. The Contents of this Book 3. A Last Moment Shift in Policy? Some Public Policy Effects in the Short and Medium Term in the Field of Gambling Etienne Marique 1. Introduction 2. Impact of the Amendment of the Law of 7 May 1999 and the Royal Decrees 3. Repercussions of the Santa Casa Decision 4. Priorities of the Belgian Presidency of the European Union Gambling Regulation in the European Union: Recent Developments Alan Littler 1. Introduction 2. Proportionality and Mutual Recognition 2.1. Proportionality 2.2. Mutual Recognition 3. Judgements and Opinions 3.1. Santa Casa 3.1.1. Santa Casa – the Issues 3.1.2. Santa Casa – the Opinion

xiii 1 1 2 3

5 5 6 9 11

15 15 20 20 22 27 27 27 28

v

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

3.1.3 Santa Casa – the Decision 3.2. Commission v. Spain 3.3. Betfair 3.3.1. Betfair – the Issues 3.3.2. Betfair – the Opinion 3.4. Ladbrokes 3.4.1. Ladbrokes – the Issues 3.4.2. Ladbrokes – the Opinion 3.4.3. Ladbrokes – Exercising Jurisdiction over the Internet 3.5. Winner Wetten 3.5.1. Winner Wetten – the Issues 3.5.2. Winner Wetten – the Opinion 3.6. Sjöberg and Gerdin 3.6.1. Sjöberg and Gerdin – the Issues 3.6.2. Sjöberg and Gerdin – the Opinion 3.7. Engelmann 3.7.1. Engelmann – the Issues 3.7.2. Engelmann – the Opinion 3.8. Markus Stoß 3.8.1. Markus Stoß – the Issues 3.8.2. Markus Stoß – the Opinion 3.9. Carmen Media 3.9.1. Carmen Media – the Issues 3.9.2. Carmen Media – the Opinion 4. Concluding Remarks

31 34 38 38 41 44 44 46 48 50 50 52 54 54 55 58 58 59 62 62 64 69 69 70 73

The Perspective of the Swedish Presidency on the Issue of Gambling Ellen Heldahl Introduction The Socio-Economical Problems Related to Gambling Gaming Responsibility Measures Different National Legislations Conclusion

75

Practical Implications of the Santa Casa Judgment Justin Franssen and Frank Tolboom 1. Introduction: The Santa Casa Judgment 2. Trends in European Gambling Related Case Law 2.1. The Common Denominator: Margin of Discretion

87

vi

76 77 79 84 85

87 87 87



Contents

2.2. Application of the Proportionality Principle: A Different Approach? 89 2.3. Conclusion 91 3. Santa Casa in Relation to Previous Case Law 91 3.1. Introduction 91 3.2. Explicit Rejection of Mutual Recognition 92 3.3. Application of the Proportionality Principle 92 3.3.1. Suitability Test 93 3.3.2. Necessity Test 94 3.4. Conclusion 95 4. Discussion on the Subsequent ECJ Proceedings 96 4.1. AG Bot: Joined Cases of Betfair and Ladbrokes 96 4.2. AG Bot: Winner Wetten 97 4.3. AG Mazak: Engelmann and AG Bot: Sjöberg 97 4.4. AG Mengozzi: Carmen Media and Markus Stoß 98 5. Practical Implications of the Santa Casa Ruling and Opinions of the Advocates General 99 5.1. Implications for National Gambling Policies 99 5.2. Implications for Private Operators 99 5.3. Remaining Questions 100 5.4. Solution: A Principle of Conditional Recognition? 101 6. Conclusion 102

Is There a Future for a Comprehensive EU Gambling Services Policy? Philippe Vlaemminck 1. Introduction 2. The Current Status of Gambling Services in EU Law as a Starting Point for Further Political Discussions 2.1. The Case Law of the ECJ and EFTA Court 2.2. Secondary EU Law Related to Gambling Services 3. A Comprehensive Approach Based on Active Subsidiarity 4. Any Changes in the Market can Only be Based on a Precautious Approach 5. Re-establishing the (Competitive) Balance in the Gambling Sector 6. The Specific Role of Lotteries in the European Society 7. Guaranteeing a Sustainable Policy for Gambling in the EU: An EU Framework for Gambling Services 8. Conclusions

105 105 106 106 112 114 115 115 117 117 118

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In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

A View from the British Isles 119 David Miers 1. Introduction 119 2. The Salience of Commercial Gambling in Great Britain 120 2.1. Participation 120 2.2. Spend 120 2.3. The Industry 121 3. The Regulatory Structure in Outline 122 3.1. Authorisations and Exceptions 122 3.2. The Operating Licence 124 3.2.1. Types of Operating Licence 124 3.2.2. Determining Applications for an Operating Licence 125 3.2.3. Licence Conditions 126 3.3. The Personal Licence 127 3.4. The Premises Licence 128 4. The Gambling Commission 130 4.1. The Commission’s Core Responsibilities 130 4.2. The Hierarchy of Regulatory Control 131 4.3. The Commission’s Approach to Regulation, Compliance and Enforcement 133 5. Remote Gambling 134 6. Gaming Machines 137 6.1. Introduction 137 6.2. The Regulatory Regime for Gaming Machines 139 6.3. The Categorical Structure 141 6.3.1. Category A 142 6.3.2. Category B 142 6.3.2.1. Category B1 142 6.3.2.2. Category B2 143 6.3.2.3. Categories B3 and B3A 143 6.3.2.4. Category B4 143 6.3.3. Category C 144 6.3.4. Category D 144 6.4. The Application of the Licensing Objectives 144 6.4.1. Preventing Gambling from being a Source of Crime or Disorder, being Associated with Crime or Disorder or being Used to Support Crime 145 6.4.2. Ensuring that Gambling is Conducted in a Fair and Open Way 146 6.4.3. Protecting Children and Other Vulnerable Persons from being Harmed or Exploited by Gambling 149 7. The Responsible Gambling Strategy Board 151 viii



Contents

The New Belgian Gambling Regulation in the European Context Nele Hoekx 1. Introduction 2. The Situation before Amendment of the Gambling Act of 1999 2.1. The Situation before the Gambling Act of 1999 2.2. The Introduction of the Gambling Act 2.3. Attempts to Modify the Gambling Act 2.3.1. Needs for Modification 2.3.2. Amendments and Failed Attempts 3. The Amendment of the Gambling Act 3.1. New Types of Licences 3.1.1. Betting 3.1.2. Media Games 3.1.3. Gambling through Information Society Instruments 3.2. Gaming Commission 3.3. Player Protection 4. The New Gambling Act in European Perspective 4.1. The European Framework for Gambling 4.2. The Belgian Gambling Act and EU Secondary Law 4.3. Conformity of the Belgian Gambling Act with the Treaty 4.3.1. Gambling and the Relevant Treaty Provisions in the ECJ’s Jurisprudence 4.3.1.1. Evolution of the Case Law 4.3.1.2. Mutual Recognition 4.3.2. Justification of the Belgian Restrictions 4.3.3. Proportionality of the Belgian Restrictions 4.3.3.1. Mandatory Establishment of Online Operators on Belgian Territory 4.3.3.2. Licences of Other Member States 5. Conclusions

153

Recent Developments in German Gambling Law Tilman Becker 1. Introduction 2. Categories of Gambling Activities 2.1. Lotteries 2.2. Traditional Casinos Games (Card Games and Roulette) 2.3. Gambling Machines 2.4. Sports Betting 2.5. Contests

191

153 153 153 154 155 155 156 158 159 159 162 163 166 166 168 168 171 175 175 175 177 181 184 184 186 188

191 192 192 195 195 196 197

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In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

3. The Interstate Treaty on Gambling 4. Unresolved Problems 4.1. Coherence between Federal and State Law 4.2. Internet Gambling 5. Concluding Remarks

199 202 202 206 206

Changes Large and Small in Dutch Policy on Gambling Cyrille Fijnaut 1. A Small but Complex Market 2. Towards a New Betting and Gaming Act 3. The Current Situation 4. Future Regulation of Gambling 5. Finally, the European Dimension

209

The New French Legislation on Online Gambling in its European Perspective Fabienne Péraldi Leneuf 1. Introduction 2. The Public Organisation of French Gaming and Betting before the European Case Law 2.1. Former Monopolistic Structures 2.2. The Pursuit of General Interests Linked to Public or Social Order 3. The Adaptation of French Case Law to European Case Law 4. French Legislation in European Perspective Today 4.1. The Conditions of the French Reform 4.2. The French Bill regarding European Law French Contract Law and Protection of the Internet Gambler in the New French Legislation Aurélie Jouette Melchior 1. Introduction 2. The Legal Definition of Online Gambling in French Law 3. The Conclusion of the Gambling Contract 3.1. The Legal Definition of the Gambling Contract 3.1.1. The Principles 3.1.2. Issues Raised by the Legal Definition 3.2. Operators’ Obligations at the Time of Contract Formation

x

209 210 211 214 217

219 219 220 220 224 227 230 230 232

237 237 238 240 240 240 241 243



3.2.1. Information Provided to the Gambler 3.2.2. Unfair Terms 4. Enforcement of the Contract 4.1. The French Civil Code 4.2. Rights of Gamblers Towards the Operators 4.2.1. The Role of ARJEL 4.2.2. The Right to Judicial Claim Based on the Contract 5. Conclusions

Gambling Regulation in Europe: Moving beyond Ambiguity and Hypocrisy Alain-Laurent Verbeke 1. The Member States 2. The European Framework 3. Beyond Ambiguity 4. Beyond Hypocrisy 5. Conclusion

Contents

243 245 246 246 247 247 248 249

251 251 253 255 256 258

About the Authors Appendix 1: Case C-42/07, Santa Casa Appendix 2: Report on the integrity of online gambling Appendix 3: European Council, Gambling and betting: legal framework and policies in the Member States of the European Union, Presidency Progress Report, 16022/08, 27 November 2008

261 265 281

Index

311

295

xi

Foreword

The Regulation of Gambling research group at Tilburg University’s Law School has organised three international symposia in recent years on the regulation of gambling in the European Union and its Member States. The first symposium took place in 2005 and dealt with gambling regulation in a European and national context. The second took place in 2006 and considered the economic aspects of regulation in both the United States and the European Union. The topic for the third symposium, in 2007, was the role of the problems of crime and addiction in discussion of the regulation of gambling. The contributions to these symposia were published by Martinus Nijhoff Publishers (Leiden) in 2006, 2007, and 2008 as A. Littler and C. Fijnaut (eds.), The Regulation of Gambling. European and National Perspectives; T. Coryn, C. Fijnaut and A. Littler (eds.), Economic Perspectives of Gambling Regulation. EU and US Perspectives; and A.C.M. Spapens, A. Littler and C. Fijnaut (eds.), Crime, Addiction and the Regulation of Gambling. The fact that it was the Tilburg research group that organised these symposia led to it increasingly becoming a nodal point for contacts between researchers in Europe and the United States in the field of gambling regulation. One of the main partners in this network is the Research Program on Gambling Law set up on the initiative of Prof. Alain-Laurent Verbeke and Nele Hoekx at the Institute for Contract Law at the law faculty of Leuven University (Belgium). Working in close collaboration with the Belgian Gaming Commission, the research group organised three national colloquia in 2008 and 2009 on a wide range of aspects of gambling legislation and gambling policy in Belgium. During a discussion of the best way to round off this series of colloquia, it was proposed that the two research groups should join forces to organise an international colloquium towards the end of 2009. Their collaboration has resulted in the present publication. With the aid of the Belgian Gaming Commission, the Belgian National Lottery, and the Dutch State Lottery, an international colloquium was organised in Leuven on 10 November 2009, attracting a large number of participants. Leading speakers dealt with current trends and developments in policy on gambling. Among the matters considered were the recent case law of the European Court of Justice and the Littler et al. (eds.), In the Shadow of Luxembourg, xiii–xiv ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

current state of discussion within the European Council’s Working Group on Gambling. Various speakers also gave their views on gambling policy in Belgium, France, Germany, the Netherlands, and the United Kingdom. The presentations have been brought together in the present publication, along with a number of important policy documents. This is therefore the fourth book in the series on gambling policy within the European Union. Together with the dissertation that Alan Littler recently defended at Tilburg University – Member States versus the European Union: the Regulation of Gambling (to be published by Brill in this series) – it gives a very good idea of what is going on in this part of the world as regards the regulation of gambling as it stood in May 2010. We would like to thank the speakers for reworking their presentations so that they could be published in this book. Secondly, we would like to thank the secretarial department of the Belgian Gaming Commission and Maurits Boer for their assistance in organising the colloquium. Finally, we would like to emphasize once again that in Brill’s Lindy Melman we have a publisher whom all right-minded authors would be only too happy to claim as their own. Tilburg-Leuven, Spring 2010 Alan Littler Nele Hoekx Cyrille Fijnaut Alain-Laurent Verbeke

xiv

General Introduction Cyrille Fijnaut

1. The Aim and Programme of the Symposium The fact that there were so many participants at the symposium held in Leuven on 10  November 2009 was doubtless due in great measure to important developments within the gambling markets of Europe – in particular within the European Union and its Member States – and in other parts of the world. One might also refer to the decline of the casinos in Atlantic City and the construction of mega-casinos in Singapore, as well as the Mafia-like practices that have come to light in recent years in the world of betting on sports events.1 I assume, however, that the excellent attendance was even more because of recent developments regarding the regulation of gambling within the European Union and a number of Member States, or at least important developments regarding the future of this major and special sector of the economy. The aim of the international symposium was in any case to bring participants up to date regarding the evolution of gambling policy in a number of Member States and to show, as far as possible, the extent to which that evolution is bound up with the policy pursued at the level of the European Union, by the European Commission, the European Court of Justice, the European Parliament, and the European Council. In order to achieve this, the first part of the symposium was devoted to policy developments, or in any case to the discussions taking place in the context of the European Union. Attention focused, first of all, on the case law of the European Court of Justice in the case of Liga Portuguesa de Futebol Profissional (CA/LPFP), Bwin International Ltd, formerly Baw International Ltd v. Departamento de Jogos da

1 Bagli, C., ‘In Casinos, New York Faces Uncertain Returns’, The New York Times, 30 January 2010; Creswell, J., ‘Can Atlantic City Raise the Stakes’, The New York Times, 25 October 2009; Reuters, ‘Singapore rekent op rijke gokkers’, De Standaard, 15 February 2010; Teuffel, F., ‘Das Betrugssystem ist grenzenlos’, Zeit/Online, 20 November 2009. Littler et al. (eds.), In the Shadow of Luxembourg, 1–4 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

Santa Casa da Misericórdia de Lisboa.2 Secondly, a representative of the Swedish Presidency was requested to update participants on the state of discussions within the Working Group on Gambling which was set up within the European Council in 2008 at the initiative of France. Thirdly, a number of members of the European Parliament were invited to give their views on the policy that is being pursued – or that they think should in fact be pursued – in this politically highly sensitive area. The second part of the symposium concerned important developments in the gambling sector in a number of Member States, namely Belgium, France, Germany, the Netherlands, and the United Kingdom. We would also have liked to have invited qualified researchers from other Member States to give their views on relevant issues in their own country; this time too, however, we were unable to identify researchers in countries such as the Czech Republic, Greece, Poland, and Spain whom we considered should be invited. This in itself shows that scholarly research on gambling is still in its infancy where Europe is concerned. The symposium was opened by the chairman of the Belgian Gaming Commission with an address in which he set out the dilemmas that play a major role in formulating a balanced policy on gambling in any country. He then gave the floor to Mr Carl Devlies, State Secretary for Combating Fraud, who explained the changes in the Belgian Gambling Act that were under discussion – that same day – in the Belgian Senate.

2. The Contents of this Book Following on from the above, it is appropriate to give some information about the contributions included in the present volume. The first chapter Some Public Policy Effects in the Short and Medium Term in the Field of Gambling (Etienne Marique) brings the reader up to date with the recent legislative amendments in the Member State where this conference was hosted, Belgium. Furthermore it offers some insights into the priorities of the Belgian Presidency of the European Union, which is held during the second half of 2010, with regards to gambling. This is then followed by Gambling Regulation in the European Union: Recent Developments (Alan Littler) which offers a thorough overview of the case law and opinions of the Advocates General from Santa Casa through to Markus Stoß and Carmen Media. Fortunately the book not only benefits from the insights from Belgium’s Presidency, but also that of Sweden in the form of The Perspective of the Swedish Presidency on the Issue of Gambling (Ellen Heldahl). With this analysis in mind the aftermath of the ruling of the European Court of Justice in Santa Casa is analysed by several practitioners; in Practical Implications of the Santa Casa Judgement

2 Case C-42/07. 2



General Introduction

(Justin Franssen & Frank Tolboom) and Is There a Future for a Comprehensive EU Gambling Services Policy?(Philippe Vlaemminck). With the European Union setting firmly established the book takes on a more national flavour, taking in legislative developments in a variety of Member States. First off, in A View from the British Isles (David Miers) the regulatory structure prevailing in Great Britain is given a thorough analysis with particular emphasis given to gaming machines. Attention then shifts back to Belgium for a critical review of the recent legislative reforms in The New Belgian Gambling Regulation in the European Context (Nele Hoekx) which is then followed by an exposé of the Recent Developments in German Gambling Law (Tilman Becker). Movement is also afoot in the Netherlands as the reader will explore in Changes Large and Small in Dutch Policy on Gambling (Cyrille Fijnaut) as it details the rather difficult and somewhat controversial reception this issue receives in Dutch politics. The following two chapters concentrate upon on France; firstly with The New French Legislation on Online Gambling in its European Perspective (Fabienne Péraldi Leneuf) detailing the relationship between French and EU law before exploring the partial opening of the French online market to competition. Secondly, French Contract Law and Protection of the Internet Gambler in the New French Legislation (Aurélie Jouette Melchior) examines the nature of contracts for gambling services in French law and the protection of consumers. Reflecting the order of the conference day, Alain-Laurent Verbeke offers a number of concise yet sharp concluding remarks in Gambling Regulation in Europe. Moving beyond Ambiguity and Hypocrisy.

3. A Last Moment Shift in Policy? As explained in a number of the contributions, the ruling by the European Court of Justice in the case of Liga Portuguesa de Futebol Profissional (CA/LPFP), Bwin International Ltd, formerly Baw International Ltd v. Departamento de Jogos da Santa Casa da Misericórdia de Lisboa is an important step in the development of EU case law regarding the regulation of gambling. After all, that ruling leaves no room for misunderstanding. No less important, however, is the initiative announced by the new Commissioner for the Internal Market and Services, Michel Barnier. Unlike his predecessor, Charlie McCreevy – who seemingly wished to use infringement procedures to force the Member States to pursue the policy that he himself preferred – Mr Barnier clearly wishes to extend the debate initiated by the Member States in 2008 within the Working Group on Gambling to the European Commission itself. He in any case announced during a recent discussion of online gambling with the European Parliament that he wishes to join with the Member States in develop-

3

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

ing an overall strategy for regulating gambling within the EU. In order to give structure to that discussion, he intends publishing a Green Paper.3 This initiative is therefore indicative of an entirely different approach to the discussion of regulation of gambling within the EU. Whether it will give rise to a different overall strategy on this issue naturally remains to be seen. What is clear, however, is that providing an answer to that issue will form a central component of the programme for the next international symposium, which is planned for the latter part of 2011.

3 See European Parliament, Minutes, Thursday, 11 February 2010, Strasbourg. 4

Some Public Policy Effects in the Short and Medium Term in the Field of Gambling Etienne Marique

1. Introduction The Belgian Gaming Commission has worked successfully with the Katholieke Universiteit Leuven within the framework of a series of four seminars which have been enlightening as far as the phenomenon of gaming is concerned, and specifically its legal aspects.1 This work has been conducted in parallel with amendments of the gambling law of 7 May 1999 as debated in the Belgian Parliament, and also in tandem with ongoing debates in other European countries, as well as within the European Union, including at the level of the European Court of Justice.2 At the highest level of legal culture, serious conceptual bases have gradually been put in place, thanks to a new climate of confidence with regard to gaming. It is important to maintain and develop this atmosphere, which stands in contrast to the opprobrium heaped upon it barely a decade or so ago.3 In this contribution, I will first concentrate on the impact of the amended Belgian law4 and of the royal decrees on the phenomenon of gambling, as well as the regulation of this phenomenon within the European Union as a whole. I will then move on to the repercussions of the case law of the ECJ. Finally, I will

1 Hoekx, N. and Verbeke, A.L. (eds.), Kansspelen in België/Les jeux de hasard en Belgique, (Brussels: Larcier, 2009). 2 Hereinafter referred to as the ECJ. 3 Good practice engenders credibility in public institutions and reinforces the legitimacy of policymakers. Cf. Boisvert, Y., ‘Crise de confiance et crise de légitimité: de l’éthique gouvernementale à l’éthique publique’, Revue Ethique publique, 4 (2002), 25. 4 Loi of 10 January 2010 portant modification de la législation relative aux jeux de hasard and Loi of 10 January 2010 modifiant la loi du 7 mai 1999 sur les jeux de hasard, les établissements de jeux de hasard et la protection des joueurs, en ce qui concerne la Commission des jeux de hasard, MB 1 February 2010. Littler et al. (eds.), In the Shadow of Luxembourg, 5–13 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

suggest some priorities that deserve attention, regarding the Belgian initiatives that are necessary within the framework of Belgium’s upcoming presidency of the European Union.5

2. Impact of the Amendment of the Law of 7 May 1999 and the Royal Decrees One of the fundamental components of the modification of the Belgian gambling law is its ethical contribution, which is based on encouragement,6 rather than on control.7 Although the principle of prohibiting games of chance is still clearly in force, a coherent and strict framework has been put in place for several of these games. Each time a game and its advertising transgresses this framework, criminal law will be inexorably invoked. The objective of the gambling law is to transform the negative leanings of human beings, who are not condemned but understood by the legislator, in order to mitigate the potential negative consequences of gambling and thus serve the worthy cause of general interest. Through this law, the state will protect a fundamental right associated with Article 8 of the European Convention on Human Rights – the mental integrity of an individual which, in the eyes of the European Court of Human Rights, justifies a positive obligation to unmask any internet user who acts illegally.8 The thrust therefore consists in utilising the negative forces inherent in human beings to produce positive results for the well-being of all.

5 July to December 2010. 6 Encouragement : companies which invest in staff, premises and which comply with the conditions must be able to harvest the fruit of their investments by operating games which resort to information society instruments that do not favour employment or the maintenance of premises. 7 Control : control must be complete and cover all areas: cameras, accountancy, financial structure, technical and IT aspects. 8 Case of K.U. v. Finland, 2872/02, delivered on 2 December 2008. Discussed in Docquir, P.-F., ‘Protection de l’enfance dans le carnaval numérique: l’article 8 de la C.E.D.H. impose un devoir de démasquer aux fournisseurs de service Internet’, Revue des technologies de l’information, 34 (2009), 93. The case arose out of the inability of Finnish law, as it stood at the time the facts giving rise to the domestic legal proceedings occurred, to require an Internet Service Provider to provide details of private individuals alleged to have committed criminal acts. Ultimately Finnish law failed to protect an individual’s right to private life as embodied in Article 8 through failing to ensure that an effective remedy was in place for the applicant in this case. 6



Some Public Policy Effects in the Short and Medium Term in the Field of Gambling

The European Court of Human Rights creates by virtue of Article 8 of the European Convention on Human Rights a positive obligation for the state to have legislation that allows public authorities to obtain the identity of a dangerous Internet user from an Internet Service Provider. The gambling operators based abroad which do not comply with the national regulations can be assimilated to dangerous Internet users within the meaning of the judgement of the ECHR of December 2008, since the age of the player is not checked, the honesty of the games not proved, and advertising intrusive. There is only one difference between the case of K.U. v. Finland and gambling situations. The latter occur many times on a big scale and this activity is trivialized with regard to young people, whereas the case of K.U. v. Finland remains rather extraordinary. Moreover gambling is trivialized since everybody is aware of it, whereas all rightfully unanimously disapprove of paedophilia. In order to achieve protection, the legislator is reinforcing the identity, responsibilities and role of the Gaming Commission, providing the Commission with new competences. The Gaming Commission discloses illegal activities and irregularities.9 Therefore, the Commission’s role in fighting tax fraud in games of chance, which already existed in the 1999 law, has been broadened to include internet casino games, actual and virtual betting, and games in the media. The Betex operations have proved that disorder and conflict had to make way for order and harmony.10 The freedom to offer casino games via the internet has now been organised, ending total prohibition. The ethics of gaming regulation exceed professional ethics and ensure a balance between the collective and individual freedoms of citizens: in other words, the balance between the right to conduct business and the rights of consumers to receive an honest service that does not take advantage of their gullibility and vulnerability. Regulation relates to ethics, which every society may expect, and not to the ethics of a profession and between professionals and their clients. The ethics of the regulator are in line with the general interest and thus aim at ensuring the integrity of the games offered and a fair treatment of the operators. Moreover the regulator must speak for the facts it aware of in the course of its duty with respect for the truth and by aiming at the transparency of the law for a better efficiency of the gambling public policy and a better legal security for the consumers and operators.

9 Article 29 of the Code of Criminal Procedure stipulates that any civil servant or public officer who becomes aware of an offence or misdemeanour during the exercise of its duties is required ‘to report it immediately to the competent prosecutor (Procureur du Roi) and supply this prosecutor with all the information, minutes and documents relating to it.’ 10 Betex operations are a coordinated effort between the Federal Public Service for Finance, public prosecutors and the police with the purpose of levying the taxes due from the betting agencies. 7

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

With this law, there is now a counterweight to the wave of deregulation and liberalisation that can be witnessed in other jurisdictions, where the notion of ‘economic philosophy’ is used to dissimulate the desire to make as much money as possible. The pursuit of profits by business companies is only one of their goals, which is subordinated to a moral and ethical goal. The Gaming Commission, as a participant in authority, has been given a mission of an exemplary and pedagogic nature. It must contribute to the progressive building of a better society. The law is participating in a change of mentality with regard to gambling and protecting the player. The latter notion is no longer regarded as austere and asocial. However, this change of mentality has to be supplemented by regulations and repressive measures. Ethics call upon traditional or current values which may be improved. Law, case law, decrees and international instruments that need to be implemented are all added to this as major regulatory tools underpinned by ethics.11 Regulation by an official authority is not self-evident. It can no longer be motivated simply by the legitimacy of public service. It must be built up step-by-step and demonstrate greater efficacy than self-regulation or co-regulation, which are less mistrusted by the operators, and which up to now have failed to prove their efficacy in any way, at least where games of chance are concerned. Confirmation of the type of regulation by the legislator has significant symbolic scope, because the text reflects the complexity of the various legal elements (European law, tax law, administrative law, civil law, etc) that are related to games of chance. The Gaming Commission will continue to apply values associated with good governance (i.e. equality, impartiality and neutrality when dealing with requests) in compliance with the prescriptions of the law, with a view to strengthening public confidence,12 and will continue to put into practice the new values (freedom of action, innovation, transparency and pursuit of the satisfaction of the public) even if these new values are more lines of behaviour for achieving efficiency than moral values as such. They leave substantial room for positive creativity. The ambition is always to quickly adapt this organisation to the needs of the public by removing those among it who are opportunists. The legislator has paid special attention to gamblers who wish to complain about the honesty of games, and about the honesty of televised games in particular. The Gaming Commission, as an independent administrative authority (IAA),13 has a hybrid status and ‘an executive dimension while still performing a regulatory and judicial role’.14 Ideally, to give concrete expression to this independence,

11 E.g. the existence of a comitology procedure at the European level. 12 Rosanvallon, P., La légitimité démocratique: impartialité, réflexivité, proximité, (Paris: Seuil, 2008), 139–191. 13 Piraux, A., ‘L’éthique administrative à l’épreuve de ses usages’, Revue Pyramides, 16 (2008), 107. 14 Rosanvallon, P., footnote 12, 121. 8



Some Public Policy Effects in the Short and Medium Term in the Field of Gambling

and to ensure accountability, it would be useful to grant the Commission full autonomy in terms of financial and human resources management, giving it genuine authority to define priorities. At present, it can only propose an agenda, provide advice and implement regulatory measures, as well as conduct inquiries which may or may not lead to penalties.15 This entire stock of values constitutes a wealth of resources when it becomes a matter of asserting at the European level that if serious, professional and ethical regulation is possible in one country, there is every reason to believe that this model is exportable and that other ways of protecting gamblers may be envisaged besides granting a monopoly to one operator.

3. Repercussions of the Santa Casa Decision The decision of the ECJ of 8 September 2009 stands in line with good sense and gives an intelligible interpretation of the applicable Treaty provisions.16 The decision confirms an obvious point: games must be controlled within the countries where they are played and subject to the national rules of that jurisdiction. The country where online games are played controls the majority of the games offered from the point of view of the honesty of the game. It is the view of the Commission that rules of the game must be clearly defined, remain constant, with real rather than fictitious players, and use ethically defined advertising.17 The trivialisation of gambling via offers of free games must be prohibited. Furthermore, financial transparency, professionalism and the number of operators can remain under supervision. The control of advertising and financial flows, as well as the role of the providers, can be usefully reinforced thanks to the new legal provisions. The decision does not rule on the necessity of monopolies, which is only one possible method of channelling gamblers. However, for this method to be justified, the monopoly must channel those who wish to gamble and must not have the effect of creating new swathes of gamblers among the population. With respect to public or private monopolies, the case law of the EFTA Court clearly shows that each time an operator has the advantage of a monopoly, this operator must be subject to independent regulation.18 The decision does not

15 Schwarz, R., ‘Des failles dans les dispositifs de contrôle de l’intégrité et de la responsabilité des services publics’, Revue Ethique publique, 9 (2007), 19–20. 16 Case C-42/07, Liga Portuguesa de Futebol Profissional (CA/LPFP), Baw International Ltd v. Departamento de Jogos da Santa casa da Misericordia de Lisboa, n.y.r. 17 Simulated games may not mislead the player onto actual pay-out tables. 18 EFTA Court, E-1/06, EFTA Surveillance Authority v. Norway, decision of 14 March 2007 where at para. 51 it was held that ‘it is reasonable to assume that a monopoly operator in the field of gaming machines subject to effective control by the competent public authori9

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

reinforce monopolies, but rather sanctions legal and technical control and the right for the Member State to be respected in its wish to fight fraud. A licence granted in another Member State offers no guarantee. It does not preclude the right to provide a high level of information about the game and the protection of the player. To ensure that the honesty of the game is monitored, it is vital for the Gaming Commission that this monitoring can take place at any time, unannounced, on the server. This is the official position of the Belgian government, which wants an effective, independent and immediate control. When these qualifiers are not enforceable, control is out of reach. The seriousness of the regulator must be equal in all countries by using the same criteria for the definition of the games, as well as regarding financial transparency, the honesty of the games and the operators’ professionalism. The ancillary consequence of this is that tax must be levied in the country where the server is located, but this is only a spin-off effect and not the main goal pursued. It has always been a matter of logic that the fact of having obtained a licence in a country does not prove that the games offered by the holder of this licence comply with the standards set in the country where the game is played. The regulatory regimes in place in some jurisdictions that grant licences cannot be considered as being credible, because the regulation incorporates neither moral values nor, and above all else, professionalism. Indeed, sometimes this so-called regulation is even contradictory. For example when a state defends the idea that its operators must be allowed to offer games to consumers on condition that their servers are located on its territory, but denies countries where the game is played, the right to conduct their own monitoring. In reality, this practice is seeking to shield the monitoring of the honesty of games from the serious efforts of the regulatory authority of the Member State where the service is received. The impression given by this kind of regulation and by self-regulation by the industry is that they are complacent and superficial. While most state regulation has to prove its results and effectiveness, these types of regulation have not tried to prove anything. Control is non-existent. The regulation only exists in words, but there is no intention to actively implement its content. In the eyes of the ECJ, even the centuries-old practice of Santa Casa da Misericordia has more value than a licence based on the regulation of certain Member States. For a licence from another Member State to be recognised, the licence must be reserved only for serious, financially stable professionals who comply with the ethical values of the Member State of destination, and the laws and regulations in the country of consumption. The operators enjoying certain regimes have

ties will tend to accommodate legitimate concerns of fighting gambling addiction better than a commercial operator or organisations whose humanitarian or socially beneficial activities partly rely on revenues from gaming machines.’ 10



Some Public Policy Effects in the Short and Medium Term in the Field of Gambling

never even attempted to make any efforts in this direction. These operators have hidden behind principles that are still geared towards the outcome of financial results, and dare to claim that they are engaged in an activity which, when left alone, produces and engenders obvious abuses. The social consequences (excessive indebtedness, criminal activity, compulsive behaviour, etc) are worthy of consideration by each State so that a public policy for games of chance can be set. It is the responsibility of the operators to comply with this policy and it is not their job to create rules and certainly not rules contradicting their own financial concerns. In brief, the fact that Belgium has an independent and serious system of regulation proves that it has sufficient means to ensure ‘sufficient protection for consumers against the risks of fraud and criminality’19 and is thereby responding to the Court’s case law.

4. Priorities of the Belgian Presidency of the European Union In my point of view, the following features should be considered as priorities by the Belgian Presidency of the European Council during the second half of 2010: – An initial line of action aims at harmonising several points relating to games of chance, e.g. the establishment of an independent regulator and administrative cooperation between regulators, consumer protection measures and prohibition of cross border advertising, the role of lotteries in society, online gambling and essential cross border issues.

– The essential objectives are to protect the player, and more specifically vulnerable players and younger players, over as wide a territory as possible, as well as to fight the criminality and fraud that are always present in this environment. The players are effectively moving from one country to another. Harmonisation measures are vital. Players under 21 should not be able to access the most dangerous games of chance. The games available from the age of 18 should be the less dangerous games, with limited stakes and prizes. People between 18 and 21 are not yet financially independent. This justifies enhanced protection.



– Information about gambling and the effects of pathological gambling should be widely diffused. European information days about protecting gamblers should be synchronised in all countries of the European Union, and have the support of TV and radio in particular.

19 Case C-42/07, Liga Portuguesa de Futebol Profissional (CA/LPFP), Baw International Ltd v. Departamento de Jogos da Santa casa da Misericordia de Lisboa, paragraph 69. 11

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling



– Free games must be true to reality. These games are not subject to the same technical rules used for real games. The offer of astronomical wins induces gamblers to gamble, irrespective of the type of game of chance and without distinguishing the type of operator. A maximum amount should be set. The number of extremely large prizes should be limited for fixed periods.



– The trivialisation of gambling in the form of free games (with e.g. free chips or credits) should be prohibited throughout the European Union.



– If harmonisation is not achieved throughout the territory of the European Union, increased cooperation between several countries could be envisaged for the points mentioned above.



– The regulators in each country should be allowed a permanent institutional meeting place for examining agreements or protocols in order to intervene to ensure better protection for the population who are vulnerable when it comes to gambling. The definitions of games should be more coherent, and the vocabulary relating to dependency should be uniform. The effect of monopolies and their future would be examined. The exchange of good practice and audits performed by organisations like the Financial Action Task Force (FATF) could be implemented within the framework of a European institution for regulating games of chance and policies for protecting players. Cross audits would take place between regulators and would insure the enforcement of the law.



– Such an institution could define which players are accepted and which forms of registration would be necessary to access the games. Age is not the only consideration. Other criteria are applicable. People with a legally recognised mental illness must be protected vis-à-vis betting services.



– Self-exclusion measures taken by a player in one Member State must be effective in all Member States. This exclusion must be monitored and action taken to ensure effective protection. Those banned by law (those declared bankrupt) should ideally be treated in the same way, and the legal criteria to determine who should be subject to this automatic exclusion should be harmonized at the European level. There should be an option of exchanging information between regulatory authorities when information is held in databases to ensure wider implementation.



– There must be a means of guaranteeing the honesty of games. The random nature of games must be assured. The financial flows ensuing from these games must be known and analysed. The players’ personal and financial data must be given a level of protection which shelters players from their improper use.

12



Some Public Policy Effects in the Short and Medium Term in the Field of Gambling



– The principle of mutual recognition of regulators, who must be able to react quickly with regard to the development of new games (cross-border games for example on TV, mobile phones, etc), must be organised on the basis of a legal framework issued by the European Commission. It must be possible to implement the instruments of the agreements in order to include the legal position and the competences of the regulators (i.e. examination of the origin of the funds, financial transparency, fight against fraud and money-laundering, examination of the integrity of the operators, etc).



– A minimum level of competences and effective control must be granted to the regulator in each country in order to ensure the regulation of social commitments, complaints, the honesty of the games, information for players, etc.

The European Commission should react if the (European) Council clearly sets out its point of view on cross-border games, and after the European Parliament has voted, by a very large majority, on the resolutions in the Schaldemose report.

13

Gambling Regulation in the European Union: Recent Developments Alan Littler

1. Introduction ‘A billion dollar industry, which concerns a dangerous and culturally sensitive activity. A service which, thanks to new methods of communication, readily crosses borders. An un-harmonised sector and a casuistic case-law’.1 Such are the opening lines of one the more recent Opinions of an Advocate General concerning the regulation of gambling within the internal market. This contribution does not aspire to dispute such a characterisation of the current debate. Nevertheless it aims to sketch out the principal elements of the debate concerning the regulation of gambling within the European Union, as a precursor to the subsequent contributions of the speakers from the conference from which the book is derived. In the months following the conference several Advocates General provided their Opinions to a number of pending preliminary reference procedures. Given the fact that these Opinions cast further light upon the debate as to how the national competence to regulate gambling should be balanced, in theory and practice, with the free movement principles upon which the internal market of the European Union is founded, they shall be included within this chapter. Two principles, proportionality and mutual recognition, shall unite the discussion of the case-law and opinions with a view to mapping out the discretion which Member States have to regulate gambling whilst respecting the 1 The opening lines of the Opinion of Advocate General Mengozzi in Case C-316/07, Markus Stoß v. Wetteraukreis, delivered on 4 March 2010, para. 1. Author’s own translation of: ‘Een miljardenindustrie, waarbij het om een gevaarlijke en cultureel gevoelige activiteit gaat. Een dienst die, dank zij de nieuwe communicatiemiddelen, gemakkelijk de grenzen overschrijdt. Een niet-geharmoniseerde sector en een rechtspraak die casuïstisch is.’ Littler et al. (eds.), In the Shadow of Luxembourg, 15–74 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

supremacy of the freedom to supply services and the freedom of establishment. To otherwise wholly negate the application of these two freedoms from the regulation of gambling services and gambling service suppliers would not only be insurmountable and unprecedented, it would also set a dangerous precedent for the ongoing creation of the internal market within the European Union. Indeed, one of the core objectives of the European Union, which applies to all economic activities, is the establishment of the internal market. According to Article 3(3) of the Treaty on the European Union (hereinafter the ‘TEU’) such a market shall, amongst other objectives, aim for a ‘highly competitive social market economy, aiming at full employment and social progress’ whilst promoting scientific and technological advance. Equally it seeks to combat social exclusion and discrimination whilst promoting social justice and solidarity between the constituent Member States. Although all of the gambling related case-law will not be covered, given that earlier literature has dealt with these cases,2 attention will be given to a few fundamental elements of the constitutional order of the internal market to familiarise the reader with the changes arising from the Treaty of Lisbon. This 2 See Allen, B., ‘Ladies & Gentlemen, No More Bets Please’, Legal Issues of Economic Integration, 27(2) (2000), 201–206, Brown, A., ‘The Obligation to Advertise Betting Shop Licences Under the EC Principle of Transparency: Case C-260/04 Commission v Italy’, Public Procurement Law Review, 1 (2008), 1–7; Cuyvers, A., ‘Joined Cases C-338/04, C-359/04 and C-360/04, Massimiliano Placanica, Christian Palazzese and Angelo Sorricchio (Placanica), Judgment of the Grand Chamber of 6 March 2007, ECR [2007] I-1981’, Common Market Law Review 45 (2008), 515–536; Eadington, W., ‘Gambling Policy in the European Union: Monopolies, Market Access, Economic Rents, and Competitive Pressures among Gaming Sectors in the Member States’, in Coryn, T., Fijnaut, C. & Littler, A., Economic Aspects of Gambling Regulation: EU and US Aspects (Martinus Nijhoff, Leiden, 2008), 71–90; Hoekx, N., ‘Placanica: Combating Criminality vs. Reducing Gambling Opportunities as Grounds for Justification in the ECJ’s Jurisprudence’, in Spapens, T., Littler, A. & Fijnaut C., Crime, Addiction and the Regulation of Gambling (Martinus Nijhoff, Leiden, 2008) 69–92; Littler, A., ‘The Regulation of Gambling at European Level: The Balance to Be Found’, ERA Forum, (2007), Vol. 8, 357–371; Littler, A., ‘Has the ECJ’s Jurisprudence in the Field of Gambling Become More Restrictive when Applying the Principle of Proportionality?’, in Littler, A. & Fijnaut, C., The Regulation of Gambling: European and National Perspectives (Martinus Nijhoff, Leiden, 2007) 15–40; Littler, A. ‘Regulatory Perspectives on the Future of Interactive Gambling in the Internal Market’, European Law Review (2008), Vol. 33 (2), 211–229; Littler, A., Member States versus the European Union: The Regulation of Gambling (Martinus Nijhoff, Leiden, forthcoming 2010); Littler, A., ‘Een Europese kijk op de voorgestelde wijzigin van de Kansspelwet / Un point de vue européen sur la proposition d’ amendement de la loi sur les jeux de hasard’, in Hoekx, N. & Verbeke, A.L. (eds.), Kansspelen in België: Verslagboek seminaries over kansspelen 2008–2009 (Larcier, Gent, 2009), 3–38; Straetmans, G., ‘Case C-124/97, Läärä and Case C-67/98, Zenatti’, Common Market Law Review, 37 (2000), 991–1005; Straetmans, G., ‘Case C-6/01, Anomar v. Estado português, Case C-243/01, Piergiorgio Gambelli; and C-42/02 Diana Elisabeth Lindman’, Common Market Law Review, 41 (2004), 1409–1428. 16



Gambling Regulation in the European Union: Recent Developments

Treaty entered into force a matter of weeks after the conference took place, namely on 1 December 2009, upon which date the three pillar structure which had constituted the European Union fell and the European Community as such ceased to exist. After this date it is correct to talk of ‘Union’ law in relation to the free movement principles as opposed to ‘Community’ law as was previously the case. The free movement principles are now found within the Treaty on the Functioning of the European Union (hereinafter ‘TFEU’). For the purposes of this work, these changes principally relate to a renumbering of the applicable treaty articles. Article 49 of the TFEU provides that Member States are prohibited from restricting the freedom of establishment of nationals of one Member State in the territory of another Member State.3 This prohibition is not absolute however, since it is moderated by restrictions designed to uphold objectives concerned with public policy, public security and public health, in addition to objective justifications covering indistinctly applicable measures.4 Whilst in theory this provision secures the cross-border movement of gambling service providers within the internal market, Article 56 TFEU similarly secures the movement of the gambling services, by enacting an identical prohibition in relation to services which are provided by a person ‘established in a Member State other than that of the person for whom the services are intended’.5 This is a residual freedom, thus an activity shall be considered as a ‘service’ in as far as it does not fall within the freedom of movement for goods, capital and persons. The latter category can be sub-divided into workers and establishment. Contrary to the impression given by the Treaty, the division between establishment and services is not particularly clear cut and it has been left to the Court of Justice to provide guidance as where to locate the dividing line.6 In the earlier gambling cases the Court of Justice approached both freedoms simultaneously, but given the nature of the preliminary questions most focus at the moment is on Article 56 TFEU, as evidenced by the decision in Bwin7 and the Opinions of several Advocates 3 Formerly Article 43 of the Treaty Establishing the European Community (hereinafter ‘EC’). In terms of legal persons, this prohibition also relates to agencies, branches and subsidiaries. 4 See Article 52 TFEU, which replicates Article 46 EC. 5 Formerly Article 49 EC. 6 First and foremost, reference should be made to the case of Case C-55/94, Reinhard Gebhard v. Consiglio dell’Ordine delgi Avvocati e Procuratori di Milano, [1995] ECR I-4165. See also literature in this field such as a Hansen, L.J., ‘Full Circle: Is There a Difference between the Freedom of Establishment and the Freedom to Provide Services?’, in Andenas, M. & Roth, W.-H. (eds.), Services and Free Movement in EU Law (Oxford: Oxford University Press, 2002), 197–209. 7 Case C-42/07, Liga Portuguesa de Futebol Profissional and Bwin International Ltd v. Departamento de Jogos da Santa Casa da Misericórdia de Lisboa, n.y.r. 17

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

General in Betfair,8 Markus Stoß 9 and Carmen Media for example.10 This is not to say howver that the freedom of establishment is becoming irrelevant in an age of internet-based gambling services, and questions still arise within the scope of Article 56 TFEU. The Opinion of Advocate General Mazák in Engelmann11 and the reference made by the Greek court in Club Hotel Loutraki are examples of this.12 As already has been hinted at, another dividing line needs to be drawn, that between the national regulatory margin of discretion and the freedom of movement, which arises, in part due to the fact that the Union has not been accorded exclusive competence to regulate this activity. Consequently Member States remain competent to regulate gambling upon condition that they respect the Treaty, and particularly Articles 49 and 56 TFEU. The issue of how to strike a balance in drawing this line is extremely pertinent, given that a number of Member States have recently reformed their gambling legislation,13 or are in the process of reform or discussing the desirability

8 Opinion of Advocate General Bot in Case C-203/08, The Sporting Exchange Ltd, trading as Betfair v. Minister van Justitie and Case C-258/08, Ladbrokes Betting & Gaming Ltd, Ladbrokes International Ltd v. Stichting deNationale Sporttotalisator, delivered on 17 December 2009. 9 Opinion of Advocate General Mengozzi in Markus Stoß, supra note 1. 10 Opinion of Advocate General Mengozzi in Case C-46/08, Carmen Media Group Ltd v. Land Schleswig-Holstein, Innenminister des Landes Schleswig-Holstein, delivered on 4 March 2010. 11 Opinion of Advocate General Mazák in Case C-64/08, Staatsanwaltschaft Linz v. Ernst Engelmann, delivered on 23 February 2010. The regulation of casino gambling in Austria is also questioned in a number of preliminary references, namely; Case C-235/08, Criminal proceedings against Roland Langer; Case C-116/09, Criminal proceedings against Antonio Formato and others; and C-347/09, Criminal proceedings against Jochen Dickinger & Franz Ömer. 12 Opinion of Advoate General Sharpston in Joined Cases C-145/08 and C-149/08, Club Hotel Loutraki AE and others v. Ethniko Simvoulio Radiotileorasis, Ipourgos Epikratías, delivered on 29 October 2009 with the judgment of the Third Chamber of the Court of Justice following on 6 May 2010. 13 For example the entire Belgian regulatory regime has recently been reformed, Wet tot wijziging van de wet 7 mei 1999 op de kansspelen, de kansspelinrichtingen en de bescherming van de spelers, wat de Kansspelcommisse betreft/Loi modifiant la loi du 7 mai 1999 sur les jeux de hasard, les établissement de jeux de hasard et la protection des joueurs, en ce qui concerne la Commission des jeux de hasard of 1 February 2010. For discussion on this particular reform see Hoekx, N., ‘De wet op de kansspelen, de weddenschappen, de kansspelinrichtingen en de bescherming van de speler’, Rechtskundig Weekblad 2009–10, nr. 32, 10 April 2010, 1330–1341, Hoekx, N’, ‘The New Belgian Gambling Regulation in the European Context, elsewhere within this volume; and Littler, A., ‘Een Europese kijk op de voorgestelde wijziging van de Kansspelwet’ in Hoekx, N. & Verbeke, A.L. (eds.), Kansspelen in België/Les jeux de hasard en Belgique (Brussels: Larcier, 2009), 3–38. France has also recently reformed the regulation of gambling via the internet, opening the non-lottery part of the market to competition with the passage of the Loi no. 2010-416 du 12 mai relative à l’ouverture à la concurrence et à la régulation du 18



Gambling Regulation in the European Union: Recent Developments

thereof.14 In relation to the regulation of online gambling such discussions reflect the challenges faced by national governments when they attempt to regulate national markets in the face of the internet and its inherent capacity to challenge established regulatory preferences and models.15 As such, gambling is not unique, but nevertheless the regulation thereof fits into broader issues of internet regulation. This article will thus bring the reader up to date with developments in the Union as applicable to the regulation of gambling and the demarcation between the exercise of national competences and the supremacy of free movement. To this end, the cases and Opinions of Advocates General in Santa Casa, Commission v. Spain,16 Betfair, Ladbrokes, Winner Wetten,17 Sjöberg and Gerdin,18 Englemann, Markus Stoß and Carmen Media will be discussed, with an emphasis on the application of the proportionality principle and that of mutual recognition. To achieve this objective, some observations will be made regarding these two principles in section two, before moving onto a critique of the decisions in the third section. Before going any further, it should be noted that secondary legislation does not facilitate the cross-border movement of gambling services and service providers, nor the ability of Member States to restrict such movement. Therefore

secteur des jeux d’argent et de hasard en ligne (JORF no.0110 du 13 mai 2010 p. 8881). For a discussion of this act see Jouette Melchior, A., ‘French Contract Law and Protection of the Internet Gamblier in the New French Legislation’, elsewhere in this publication. 14 For example, the United Kingdom which does not impose any restriction on gambling services provided by means of distance communication being directed to British residents from elsewhere within the internal market has realised that this approach may not secure the objectives of the legislative framework established in and pursuant to the Gambling Act 2005. See Department for Culture, Media and Sport, A Consultation on the Regulatory Future of Remote Gambling in Great Britain, 22 March 2010. Available at (accessed 29 March 2010). 15 For example, when discussing the possible advantages of European level regulatory action, Barthet notes that whilst ‘[p]olitically it may be wise for States to reserve their rights to regulate matters of social concern such as gambling… pragmatically this might not be the best course to protect societal norms within a Member State; the fact of the matter is that regulating the internet challenges traditional notions of territorial jurisdiction and concerted action is preferable for the free-for-all that persists today.’ See Barthet, J.B., ‘Online Gambling and the Further Displacement of State Regulation: A Note on PMU v Zeturf’, International and Comparative Law Quarterly (2008), 57: 417–426, p. 425. 16 Case C-153/08, Commission v. Spain, n.y.r. 17 Opinion of Advocate General Bot in Case C-409/06, Winner Wetten GmbH v. Bürgermeisterin der Stadt Bergheim, delivered on 26 January 2010. 18 Opinion of Advocate General Bot in Joined Cases C-447/08 and C-448/08, Sjöberg and Gerdin, delivered on 23 February 2010. 19

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

attention is not paid to the E-Commerce Directive,19 the Services Directive20 and any possible impact of the Audio-visual Services Directive21 in terms of interactive television services which incorporate the provision of gambling within programming content.22

2. Proportionality and Mutual Recognition Two principles recur in the case-law of the Court of Justice, namely whether the restrictive measure is proportionate and whether the Member State where the service is received has to recognise the regulatory efforts undertaken by the Member State licensing the activities of the operator. A few observations will be made with regards to the principles of proportionality and mutual recognition before tracing the utilisation of them by the Court. 2.1. Proportionality Proportionality is a test to determine whether the restriction upon the freedom to provide services or the freedom of establishment is not disproportionate compared to the objectives of the restrictive measure. However, it does not give the Court the opportunity to actually execute a balancing test but to review the acts of national legislators whilst abstaining from substituting national decisions with its own values.23 Instead, it should provide the national court with guidance so as to enable it to determine whether the measure in question is proportional and thus compatible with Union law. Forming the basis of this test are three elements; whether the restrictive measure is suitable to achieve the objective in question, whether it is necessary and that it is proportionate strictu senso.24 As evident from the gambling

19 Directive 2000/31 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce) [2000] OJ L178/1. 20 Directive 2006/123 on services in the internal market [2006] OJ L376/36. 21 Directive 2007/65 amending Council Directive 89/552/EC on the coordination of certain provisions laid down by law, regulation of administrative action in Member States concerning the pursuit of television broadcasting activities, [2007] OJ L332/27. 22 See Littler, A., Member States versus the European Union: The Regulation of Gambling, in particular regarding the Audio-visual Media Services Directive and Littler, A., ‘Regulatory Perspectives on the Future of Interactive Gambling in the Internal Market, p. 221–225, both supra note 2. 23 See Hoffmann J, in Stoke on Trent City Council v. B & Q, [1990] 3 CMLR 31, para. 47. 24 For example as provided by the Court in Case C-331/88, Fedesa, [1990] ECR 3023. Although as van Gerven highlights the Court sometimes relies upon a two pronged 20



Gambling Regulation in the European Union: Recent Developments

case-law suitability requires that the measure is ‘genuinely directed to realising the objectives which are capable of justifying it’.25Necessity is often understood as enquiring as to whether no lesser restrictive measure is available to achieve the desired result, whereas the strictu sensu element determines whether the measure is ‘out of proportion to the intended objective or the result achieved.’26 By its very nature it is sensitive to the context in which it is applied,27 and therefore the application of this test to restrictions on gambling services and service providers can be anticipated as taking on a different shade in comparison to measures restricting other economic activities. Thus while the principle ‘remains the most important judicial tool for drawing the distinction between lawful and unlawful impediments to free movement’ the Court is able to ‘retain residual but potentially extensive control’ in its use of this principle, through applying the test with a very light touch.28 After a somewhat closer degree of scrutiny in Gambelli 29 where the Court developed the hypocrisy test30 requiring that a restrictive measure be ‘consistent and systematic’,31 thus revealing an anxiety ‘to circumscribe the discretion enjoyed by national authorities’.32 Somewhat regrettably it soon became apparent that this watershed was not everlasting. approach ‘without making it clear which of the three aforementioned elements it refers to.’ See, van Gerven, W., ‘The Effect of Proportionality on the Actions of Member States of the European Community: National Viewpoints from Continental Europe’, in Ellis, E. (ed), The Principle of Proportionality and the Laws of Europe (Oxford: Hart Publishing, 1999), p. 37. 25 Case C-67/98, Questore di Verona v. Diego Zenatti, [1999] ECR I-7289, para. 37. 26 Jans, J., ‘Proportionality Revisited’, Legal Issues of Economic Integration, 27/3 (2000), 239–265, p. 241. 27 Davies, A.C.L., ‘One Step Forward, Two Steps Back? The Viking and Laval Cases in the ECJ’, Industrial Law Journal, 37 (2008), 126–148, p. 142. 28 Tridimas, T., The General Principles of EU Law (Oxford: Oxford University Press, 2006), p. 207. 29 Littler, A., ‘Has the ECJ’s Jurisprudence in the Field of Gambling Become More Restrictive when Applying the Principle of Proportionality?’, supra note 2, p. 38–40. Case C-243/01, Criminal Proceedings against Piergiorgio Gambelli and Others, [2003] ECR I-13031. 30 van der Beek, J.C.M. and de Koning, M., ‘De Goksaga: nieuwe grenzen aan de beperkingen van gokken over de grenzen’, NTER 2004, nr. 6, 140. 31 Gambelli, supra note 29, para. 67. In other words the practice of a Member State must be consistent with the objective used to justify a restrictive measure. Indeed the Court went on to say that should national authorities incite and encourage participation in gambling services then they cannot at the same time rely upon public order concerns relating to the need to reduce gambling opportunities to justify restrictive measures. See paras. 68–69. 32 Doukas, D. & Anderson, J., ‘Commercial Gambling without Frontiers: When the ECJ Throws, the Dice is Loaded’, 27 Yearbook of European Law (Oxford: Oxford University Press, 2008), 237–276, p. 245. 21

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

Indeed, in the subsequent case of Placanica the Court shied away from a close scrutiny of the requirements of Italian tender procedure in contrast to the Advocate General.33 Although the case of Commission v. Spain illustrates that the Court is capable of thoroughly scrutinising restrictive measures, it will become evident from Santa Casa that doubts can be cast upon how anxious the Court really is to circumscribe the national margin of discretion. The Opinions of Advocate General Bot in Santa Casa and Betfair clearly indicate a preference for not circumscribing the exercise of this discretion. 2.2. Mutual Recognition As Advocate General Mengozzi suggests in Markus Stoß34 mutual recognition offers no panacea for the regulation of gambling in the internal market context. The notion of mutual recognition finds its origins in the case-law of the Court in the context of the free movement of goods with the case of Cassis de Dijon, and after many years found an explicit enunciation in the services sector. Gambelli witnessed the Court hint at the possible application of this principle in the gambling field, which has led some parties to believe that upon the basis of a licence offered by one Member State the drawbridge to the rest of the internal market would be unconditionally lowered.35 This brief section aims to sketch the relationship between mutual recognition and gambling and explain why, in the prevailing climate it cannot be applied in an absolute unconditional manner.36 Arguably, on the contrary its application should be conditioned by equivalence between national regulatory regimes.

33 See Hoekx, N., ‘Placanica: Combating Criminality vs. Reducing Gambling Opportunities as Grounds for Justification in the ECJ’s Jurisprudence’, supra note 2, p. 84. Joined Cases C-338/04, C-359/04 and C-360/04, Criminal Proceedings against Massimiliano Placanica and others, [2003] ECR I-1891. 34 See discussion in section 3.8.2 below and para. 100 of the Opinion, supra note 1. 35 Indeed, the United Kingdom government appears to be one, recently noting its disappointment at the unwillingness of other Member States to recognise licences granted to private operators under the Gambling Act 2005. See Department for Culture, Media and Sport, A Consultation on the Regulatory Future of Remote Gambling in Great Britain, March 2010. In particular point 3.9 notes that: ‘More recently, the European Commission and the European Court of Justice (ECJ) have signaled that the partial opening of restrictive markets through the introduction of national licensing systems could be implemented by member states without contravening EC law. This differs significantly from previous interpretations which suggested that mutual recognition was the only way to comply with Treaty provisions (…).’ 36 Indeed, this became clear from the Santa Casa decision which is discussed in section 3.1. 22



Gambling Regulation in the European Union: Recent Developments

Within the sphere of the free movement of goods the Court held in Cassis de Dijon that there is no valid reason why ‘provided that they have been lawfully produced and marketed in one of the Member States’ products ‘should not be introduced into any other Member State’.37 Unless, of course, the restriction on such movement could be justified by a mandatory requirement. Consequently the Court had ‘created a presumption that a product lawfully produced and marketed in a Member State has to be admitted to the markets of all other Member States.’38 Around the same time as Cassis de Dijon the Court also had to reconcile differences in national laws pertaining to services in the case of Van Wesemael. Concerning Belgian rules relating to the need for employment agencies for entertainers to hold a licence, the Court noted that the Member State where the service is received can only require that a licence is held when such a requirement is objectively justified. The Belgian licencing requirement did not take into account that agencies could be licensed in the Member State in which they were established. The Court proceeded to note that the licence requirement cannot be objectively justified when the agency holds a licence in its Member State of establishment ‘issued under conditions comparable to those required by the state in which the service is provided’ and where the activities thereof in the Member State of establishment are subject ‘to proper supervision covering all employment agency activity whatever may be the Member State in which the service is provided.’39 Thus the notion that there should be a degree of comparability or equivalence as a condition for deference to the regulations of another Member State was introduced. In the subsequent case of Webb the Court was more explicit in the duty of the Member State where a service was being received to have regard to the regulatory efforts of the Member State in which the operator was established. Here a British company, licensed to provide manpower to undertakings, provided staff to undertakings in the Netherlands whilst not being in possession of a licence to do so from the Dutch Ministry of Social Affairs, as required by Dutch law. When considering whether the licensing requirement could be excessive, and thus incompatible with free movement, the Court held that the issuance of the licence must take into account ‘evidence and guarantees already furnished by the provider’ in the state of his establishment.40 Therefore, the justifiability of the

37 Case 120/78, Rewe-Zentrale AG v. Bundesmonopolverwaltung für Branntwein, [1979] ECR 649, para. 14. 38 Snell, J., Goods and Services in EC Law: A Study of the Relationship Between the Freedoms (Oxford: Oxford University Press, 2002), p. 55–56. 39 Joined Cases 110 and 111/78, Ministère public and ‘Chambre syndicale des argents artistiques et impresarii de Belgique’ ASBL v. Willy van Wesemael and others, ECR [1979] 35, at paras. 19–20. 40 Case 279/80, Criminal Proceedings Against Alfred John Webb, [1981] ECR 2205, para. 20. 23

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

Dutch licensing regime depended upon whether it took into account guarantees offered within the British licensing system. Services achieved ‘full equality’ with the Cassis de Dijon approach in goods in the shape of the Säger decision.41 In this case there was no regulatory system for the provision of patent renewal services in the Member State of the operator’s establishment against which that of the Member State where the services were provided could be compared. Nevertheless the Court took a broad view of the measures which could infringe Article 56 TFEU noting that it requires: ‘the abolition of any restriction, even if it applies without any distinction to national providers of services and to those of other Member States, when it is liable to prohibit or otherwise impede the activities of the provider of services established in another Member State where he lawfully providers similar services.’42 As Snell highlights, the Court was not concerned whether the measures in the Member State of establishment and that where the services were provided were comparable or equivalent in establishing whether there was a restriction. It was sufficient that the services were legally supplied in the Member State of establishment; in the gambling context this would require that the licence permits the licencees to offer their services in the Member State granting them the licence. Säger did not deny however that obstacles the free movement of services could be justified by imperative requirements in the public interest where such interests are not protected by the Member State where the operator is established.43 To establish whether this is the case or not requires the Member State where the service is received to take into account the regulatory environment where the provider is located so as to establish whether a degree of comparability or equivalence prevails. Moving into the gambling related case-law, in Gambelli the Court offered guidance on assessing whether the restriction on the freedom of establishment and the freedom to provide services incurred by the then applicable Italian regime for regulating sports-betting was incompatible with Union law. Hereby, with reference to the necessity of the restrictive measures for combating fraud, the Court held that regard should be had to the fact that the suppliers of the services in question were subject in their Member State of establishment to regulation entailing controls and penalties.44

41 Snell, supra note 38, p. 60. 42 Case C-76/90 Manfred Säger v. Dennemeyer & Co. Ltd, [1991] ECR I-4221, para. 12. 43 Ibid., para. 15. 44 Case C-243/01, Criminal Proceedings against Piergiorgio Gambelli and Others, [2003] ECR I-13031, para. 73. 24



Gambling Regulation in the European Union: Recent Developments

Thus, even in the absence of any harmonisation, and indeed harmonisation is not a prerequisite for the recognition of equivalence,45 Member States have been encouraged to take into consideration the regulatory burdens placed upon operators within their Member State of establishment. Failure to do so renders measures restricting the freedom to provide services disproportionate, as the requirement imposed by the Member State where the service is received may not be necessary in light of the regulatory conditions in the place of establishment. Turning to a more theoretical approach, mutual recognition serves as a choice of governance rule through which the regulatory autonomy of the Member State receiving a service is reduced in deference to that of the home Member State.46 As such it does not involve a transfer of sovereignty to the institutions of the Union but rather a horizontal transfer arises, between the Member States concerned.47 The application thereof could be unconditional and absolute, giving the host jurisdiction where the service is received extremely limited scope to exclude an operator from its market. However, and reflecting Cassis de Dijon, to give effect to the free movement principles Member States should recognise equivalence in the regulatory efforts of the Member State regulating gambling operators.48 Are the objectives and standards regulating online sports-betting in the Member State where an operator is established equivalent to those in the Member State into which the operator wishes to export its services? Only where equivalence prevails should the Member State where the service is received defer to the regulation in the Member State licensing the operator.49 As such the application of mutual recognition is conditional although the very process of the Member State justifying any restrictive measure will have a disciplining effect upon those national laws,50 particularly in light of the consistent and systematic requirement developed in Gambelli.51 Within the disciplining of national laws which has arisen since the Treaty of Rome,52 issues or sectors which some Member States perceive to be non-trade in

45 Trachtman, J., ‘Embedding mutual recognition at the WTO’, Journal of European Public Policy, 14:5 (2007), 780–799, p. 784. 46 Ibid., p. 783. 47 Schmidt, S., ‘Mutual recognition as a new mode of governance’, European Journal of Public Policy, 14:5 (2007), 667–681, p. 672. 48 Ibid., p. 784. 49 Arguably this would not apply where the licence conditions of a particular jurisdiction prevent the licence holder from providing gambling services within the territory of that jurisdiction. See the discussion on Carmen Media in section 3.9. 50 Trachtman, J., ‘Trade and … Problems, Cost-Benefit Analysis and Subsidiarity’, European Journal of International Law, 9 (1998), 32–85, p. 59. 51 See supra note 29. 52 Trachtman, J., supra note 50. 25

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

nature are assessed for their compatibility with the free movement principles. Given the different ideologies which prevail between Member States there maybe considerable divergence in whether gambling and the related issues are perceived as amounting to trade or non-trade issues.53 As a consequence of the fact that gambling has been found to constitute an economic activity by the Court since Schindler,54 it thus falls within the economic constitution of the Union. Therefore it is somewhat inevitable that non-trade related national public policies are going to be reviewed in terms of their compatibility with the free movement provisions of the internal market. Arguably such a process should be based upon considering the degree of equivalence prevailing between national regulations, as has been alluded to. In doing so in such a manner the danger that national governments and policy are constrained by international competition should be averted;55 conditioning recognition on equivalence should forestall the infamous regulatory race to the bottom as operators will not necessarily be able to relocate to the most favourable regime and rely on licences granted to supply other Member States if that with the lowest regulatory compliance costs or rate of taxation is not equivalent to the regulatory regimes of other Member States. As an example, if the licensing jurisdiction provides that forms of gambling which are solely determined by chance can be provided via the internet, such as online roulette, yet the Member State where the service is to be received only permits online sports-betting then the host Member State would not have to open up its domestic market to online roulette. Recognition would thus be denied upon the basis of a lack of equivalence in the nature of the activities offered, thus prior to any consideration of equivalence in terms of regulatory objectives and standards. Consequently, Member States retain their autonomy in determining which forms of gambling are permitted within their jurisdiction whilst only having to recognise the regulatory efforts of other national authorities when a particular form of gambling is concurrently permitted within both Member States. Inherently such recognition of equivalence will only occur on a case by case basis.

53 Howse, R., ‘From Politics to Technocracy and Back Again: The Fate of the Multilateral Trading Regime’, The American Journal of International Law, (2002), 96(1), 94 -117, p. 97. 54 Case C-275/92, Her Majesty’s Customs and Excise v. Gerhart Schindler and Jörg Schindler ECR [1994] I-1039. 55 Dunoff, J.L., ‘The Death of the Trade Regime’, European Journal of International Law (1999), 10(4), 733–762, where at p. 753 a link is made between the ability of firms to relocate (or threaten to do so) when a change in policy could increase their costs and how this constrains the hand of national governments in enacting policies. If firms, such as gambling operators, were unable to move between jurisdictions then governments would not be threatened by such exit strategies. 26



Gambling Regulation in the European Union: Recent Developments

Therefore an approach based upon national regulatory competence and the recognition of equivalence between regimes will respect national regulatory preferences which do not accord with those of other Member States. The competence of Member States to set their own objectives in terms of regulating gambling, as repeatedly recognised by the Court, will not be undermined. Whilst not resulting in an internal market based upon uniformity recognition of equivalence would sew a ‘patchwork of equivalent national rules’.56

3. Judgements and Opinions In addition to an analysis of Santa Casa and Commission v. Spain the Opinions of the Advocates General in the following cases will be reviewed in chronological order, namely; Betfair; Ladbrokes; Winner Wetten; Sjöberg and Gerdin; Englemann; Carmen Media and finally Markus Stoß. 3.1. Santa Casa 3.1.1. Santa Casa – the Issues ‘Le contentieux en matière de jeux de hasard sur Internet est loin d’être terminé …’ concludes one case note discussing this decision of the Court of Justice.57 Indeed far from concluding the debate on the exercise of the Member States’ margin of discretion and the regulation of internet gambling this case represents one jigsaw piece out of many hundreds, possibly thousands. Perhaps somewhat unfortunately, and in contrast to someone completing a jigsaw puzzle, there is no clear instruction in the form of the result to be achieved; this case by case process will be continual, gradual and open ended. Yet, what of the piece this case contributes to the puzzle? After a brief rendition of the facts, the key points of the Opinion of Advocate General Bot and the decision of the Court of Justice will be reviewed. Since 1783 the organization of lotteries in Portugal has been vested in the same single organisation, namely the Santa Casa da Misericórdia (hereinafter ‘Santa Casa’) which in the intervening years has witnessed its monopoly expand to include off-course betting. Betting falls within the scope of so-called ‘jogos sociais’ or games of a social nature, the operation of which has been systematically entrusted to Santa Casa. In 2003 the monopoly extended to the provision of these two forms of gambling by ‘electronic means’, including the internet. However, in contravention of the Information Society Services Directive, the measures 56 Schmidt, S., supra note 47, p. 670. 57 Verbiest, T., & Monov, M., ‘Arrêt “Santa Casa”: frein ou accélérateur à la libéralisation des jeux de hasard sur internet ?’, Journal de Droit Européen, 2009, 277–278, at p. 278. 27

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

concerned were not notified to the European Commission. An operator offering games of chance online with a wider portfolio of types of games of chance offered than Santa Casa, Bwin, which holds a licence from Gibraltar, provided online sports-betting to residents of Portugal in contravention of the monopoly held by Santa Casa. Exercising its regulatory powers Santa Casa imposed a fine on Bwin for administrative offences, which Bwin subsequently sought annulment thereof and invoked Union law in its defence. Consequently the Tribunal de Pequena Instância Criminal do Porto referred a preliminary question to Luxembourg seeking guidance as to whether the exclusive rights enjoyed by Santa Casa can be used against a provider of similar services which are provided lawfully in the Member State in which the latter operator is established. Guidance was sought in relation to the freedom to provide services, the freedom of establishment and the free movement of payments. However, given that Bwin only provided its services via the internet and had no establishment, nor intention to become established, within Portugal the Advocate General and the Court both responded solely in relation to Article 56 TFEU. Furthermore the national court wanted to know whether it is contrary to Union law for national law to grant exclusive rights and then extend those rights to the internet in relation to the territory of that Member State. 3.1.2. Santa Casa – the Opinion The views of Advocate General Bot deserve attention, fore mostly in relation to his Opinion on the role of competition in this sector. However, the Advocate General also dealt extensively with the consequences of the failure of the Portuguese authorities to notify the measures extending the monopoly of Santa Casa to the internet.58 Having recalled that the Court of Justice is not ‘bound by the national court’s assessment with regard to the Community provisions applicable to the facts of the main proceedings’59 Advocate General Bot progressed to conclude that as a consequence of the failure to notify these regulations they could not be applied against Bwin, given that such a failure amounts to a ‘serious procedural defect.’60 Yet the judges did not take this matter up, but on the basis of existing case-law it would appear that the national court should decline to apply these

58 For further a more elaborate discussion concerning the application of the Information Society Services Directive to the gambling market, see Littler, ‘Regulatory perspectives on the future of interactive gambling in the internal market’, supra note 2, and Littler, A., Member States versus the European Union: The Regulation of Gambling (Leiden; Martinus Nijhoff, forthcoming 2010). 59 Case C-42/07, Santa Casa, Opinion of Advocate General Bot, delivered on 14 October 2008, para. 208. 60 Ibid., para. 189, referring to Case C-194/94, CIA Security International, [1996] ECR I-2201. 28



Gambling Regulation in the European Union: Recent Developments

fines against Bwin. If the national court desists from upholding these fines this would deprive the national system of an effective tool for the purposes of giving effect to the Portuguese regulatory model. Given that on substance the Court found the monopoly to be compatible with the principles of free movement any subsequent notification and finding of compatibility within the context of the notification procedure would see the monopoly remain standing. Perhaps the Court considered that it should be for the national court to grapple with this point, and although this seems to undermine the notification procedure it does not detract from the effectiveness of Union law as such, given that the Court subsequently found the restriction to be compatible. When commencing his assessment of the monopoly Advocate General Bot states that ‘Community law does not aim to subject games of chance and gambling to the laws of the market’ because the advantages which are analogous with competition,61 namely products and services of better quality at lower prices are inapplicable to gambling services. Rather ‘[c]alling for tenders from service providers in that field, which would necessarily lead them to offer more attractive games in order to make bigger profits, does not seem to me a source of progress and development.’62 Moreover he fails ‘to see what progress there would be in making it easier for consumers to take part in national lotteries organised in each Member State and to bet on all the horse races or sporting events in the Union.’63 Here the Advocate General appears to be sailing dangerously close to substituting his view for that of the competent national authorities and indeed, in light of the Court’s own case-law this is an assessment which each Member State should make.64 The Advocate General then proceeds to note that opening the (presumably internal) market to gambling services would have the effect of reducing household resources. For such reasons limitations on the regulation of gambling at the national level do not have the aim of establishing a common market nor liberalising this sector.65 Support is found for this in the broad margin of discretion the Court has already accorded to the Member States in relation to ensuring consumer protection, maintaining public order, arrangements for providing games of chance and gambling and the use of revenues of gambling

61 Opinion of Advocate General Bot in Santa Casa, supra note 59, para. 245. 62 Ibid., para. 246. 63 Ibid. 64 Regarding the gambling specific case-law the Court has held that it is for each Member State to decide whether it is necessary to restrict the provision of a particular gambling activity within their territory. See Schindler, supra note 54, para. 61, Case C-124/97, Markku Juhani Läärä, Cotswold Microsystems Ltd and Oy Transatlantic Software Ltd v. Kihlakunnansyyttäjä (Jyväskylä) and Suomen valtio (Finnish State), [1999] ECR I-6067, paras. 35–36, and Zenatti, supra note 25, paras. 33–34 for example. 65 Opinion of Advocate General Bot in Santa Casa, supra note 59, paras. 248–249. 29

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

and whether an operator is permitted to generate profits from offering such activities.66 Subsequently he concludes that: ‘the Member States should be limited by Community law only to the extent of prohibiting conduct whereby a Member State deflects restrictive measures from their purpose and seeks the maximum profit.’67 Drawing conclusions from this the Advocate General opines that gambling should only be opened up to competition at the national level if it is treated as a ‘true economic activity from which the maximum profits should be derived.’68 Consequently a very light touch is advocated in terms of applying the proportionality test, which Advocate General Bot suggests should only bite when a Member State manifestly exceeds its margin of discretion when adopting and enforcing national regulations.69 In essence this seeks to single out gambling from the internal market. Arguably however, whether forms of gambling are subject to competition or not is an issue distinguishable from the application of the free movement principles to the regulation of a particular form of gambling. Even where a Member State does not decide to regulate gambling with the view to profit maximization the principles embodied in the Treaty upon which the internal market is founded should not be abandoned in relation to forms of gambling permitted in a national market. Moreover, these considerations should be treated with caution since they seem ‘difficult to reconcile with the ECJ’s case-law and unsound as a matter of principle.’70 As Arnull rightly notes ‘these questions are political and economic rather than legal and the ECJ has rightly refused to get embroiled in them’ before referring to the ‘unimpeachable’ approach taken by the Court in Grogan and Schindler given that it is not the role of the Court to second guess policy choices.71

66 Ibid., paras. 250–251. 67 Ibid., para. 257. 68 Ibid. 69 Ibid., para. 258. 70 Arnull, A., ‘Gambling with competition in Europe’s Internal Market’, European Competition Law Review, 2009, 30(9), 440–446, at p. 444. 71 Ibid. It should be recalled that in Case C-159/90, Society for the Protection of Unborn Children (Ireland) Ltd (SPUC) v. Grogan, [1991] ECR I-4685, that at para. 20 the Court held that ‘It is not for the Court to substitute its assessment for that of the legislature in those Member States where the activities in question are practiced legally.’ Concerning gambling specifically it was held in Schindler at para. 32 that ‘[e]ven if the morality of lotteries is at least questionable, it is not for the Court to substitute its assessment for that of the legislatures of the Member States where that activity is practised legally.’ 30



Gambling Regulation in the European Union: Recent Developments

3.1.3 Santa Casa – the Decision Fortunately the Court, in its relatively short and at times curtly worded decision, navigated away from the approach suggested by the Advocate General. The Court noted that there are significant moral, religious and cultural differences between the Member States in terms of gambling and that each should define ‘in accordance with its own scale of values, what is required in order to ensure that the interests in question are protected.’72 As such Member States have a margin of discretion within which to determine their objectives and the level of protection sought, as established in Placanica.73 In recalling that the measure grounded in overriding reasons in the public interest must be non-discriminatory, proportionate and compliant with the notion of consistent and systematic, the Court does not appear to side with the overly light assessment suggested by Advocate General Bot. However, this does not deny that the Court grants Member States substantial grounds to restrict free movement by in effect undermining the regulatory efforts Member States have made in licensing private operators for online gambling services. As such it has led commentators to conclude that the ruling ‘represents a clear victory in favour of the national monopoly for online gambling.’74 This aspect of the Court’s ruling shall now be discussed, including possible boundaries defining the scope of the victory. The overriding objective at the heart of the Portuguese monopoly is the fight against crime, particularly to protect consumers against fraud conducted by operators which the Court considers constitutes an overriding reason in the public interest.75 A ‘high risk of crime or fraud’ is attributed by the Court to the ‘scale of the earnings and the potential winnings on offer to gamblers’,76 for which the supply of gambling services on an exclusive basis has been recognized as a suitable measure in previous case-law.77 The Court accepts the benefits of ‘controlled channels’ which arise in this instance and finds the monopoly model to be suitable for attaining the legislative objective. In part the Court relies upon the powers of the administrative authority which Santa Casa has been accorded to prosecute those it considers to be in breach of its monopoly rights. Furthermore, the suitability of the regime is seemingly guaranteed by the strict control enabled by the legal framework surrounding Santa Casa;

72 Santa Casa, supra note 7, para. 57. 73 Placanica, supra note 33, para. 47. 74 Hörnle, J. ‘Online Gambling in the European Union: a Tug of War without a Winner?’, Queen Mary University of London, School of Law Legal Studies Research Paper No. 48/2010, p. 22. 75 Santa Casa, supra note 7, paras. 62–63. 76 Ibid., para. 63. 77 Ibid., para. 64. 31

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

this permits the government to ‘exercise an effective power of supervision over Santa Casa.’78 Future case-law will hopefully elaborate upon this point so as to permit assessments to be made on whether control is sufficiently effective so as to warrant a monopoly structure as a suitable or appropriate restrictive measure. Somewhat disconcerting however is the reference to the Santa Casa’s existence for more than five hundred years as a signal of reliability;79 yet given the recent development of the necessary technology for internet gambling reliance on the long standing nature of the operator is not in and of itself proof that it offers a safe internet gambling environment. When considering the necessity of the measure, the Court recalls that the Portuguese Government submitted that it does not have the same means of control at its disposal over operators established in other Member States as it does over Santa Casa.80 Indeed, control over such operators is vested in the competent authorities in the Member State in which a particular operator is established. Varying degrees of control could be considered to exist however, a jurisdiction in Portugal’s situation could exercise a degree of control over operators accessing their market upon which recognition of an EU-based operating licence is conditional. This would require the Portuguese authorities to rely upon the regulatory efforts made by the other national authorities, but in the absence of any framework for cooperation between national authorities, exercising effective control over such an operator would involve a degree of difficulty inherently absent from controlling a domestic operator. From paragraph 69 however it becomes evident that the Court places the nexus of control not with the authorities of the Member State receiving the service but that which regulates the operator.81 Given the prevailing lack of harmonisation the Member State where the service is received is entitled to set aside the fact that the operator is ‘already subject to statutory conditions and controls on the part of the competent authorities in the State’.82 This strikes to the very heart of the case-law on avoiding double regulatory burdens and mutual recognition, as it would normally fall to the Member State receiving the service to justify why it chooses not to recognize services legally marketed within the other Member State. In light of the disparities between Member States arising from an absence of harmonisation a country of origin approach would unduly encroach upon

78 Ibid., para. 65. 79 Ibid. 80 Ibid., para. 68. 81 Dawes and Struckmann are also highly critical of this ‘sweeping statement’. See Dawes, A., & Struckmann, K., ‘Rien na va plus? Mutual recognition and the free movement of services in the gambling sector after the Santa Casa judgment’, European Law Review, 2010, 35(2), 236–262, at p. 242. 82 Santa Casa, supra note 7, para. 69. 32



Gambling Regulation in the European Union: Recent Developments

the margin of discretion of each Member State, yet the reasoning of the Court constitutes a complete denial of this principle. Regulation in the home Member State of the operator: ‘cannot be regarded as amounting to a sufficient assurance that national consumers will be protected against the risks of crime and fraud, in the light of the difficulties liable to be encountered in such a context by the authorities of the Member State of establishment in assessing the professional qualities and integrity of operators.’83 Whereas Portugal argued that difficulties would arise in it assessing the probity of operators based in other Member States the Court concentrates upon a different dynamic, rather the apparent difficulties the regulating Member States face.84 Inherently different aspects of control, supervision and enforcement than those complained of by Portugal arise here. During this case no allegations were made to the effect that Member States which choose to regulate and licence private operators faced difficulties in establishing the professional qualities and integrity of such operators. No such revelations have occurred which cast doubt upon the effectiveness of such regulatory regimes, not in relation to regimes which allow for the domestic and foreign provision of regulated gambling services and neither in relation to regulatory systems which solely permit gambling services to be directed at the regulating Member State. In casting its net so widely, the Court has arguably been over-inclusive in its approach. Had specific problems been aired or even proven with the regulatory regime in question then such a finding in relation to that regime would be understandable. By dismissing attempts by all Member States to regulate online gambling the Court is arguably disproportionate in its approach and is in danger of conflicting with its own case law by permitting restrictive measures which could deprive Article 56 TFEU of its practical effect.85 However, difficulties would arise if Portugal would have to assess the necessity of its monopoly in relation to each and every system regulating online gambling

83 Ibid. 84 In this case, the fact that a licence from Gibraltar only provides for the export of gambling services to other jurisdictions in the internal market was not touched upon. However, this particular point is not of relevance for these issues of cross-border recognition of regulatory efforts. 85 Case C-154/90, Commission v. France, [1991] ECR I-659, where at para. 12 the Court held that a Member State ‘cannot make the performance of the services in its territory subject to observance of all the conditions required for establishment; were it to do so the provisions securing freedom to provide services would be deprived of all practical effect.’ Indeed, Hoekx notes that this approach of the Court was unnecessary, see Hoekx, N., ‘Kannspelen op het internet: heft Bwin vs. Santa Casa de kaarten geschud?’, DCCR, nr. 83, 2009, 60–70, p. 69. 33

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

within the internal market, in a manner comparable to that which a system based upon a national licensing regime arguably would have to.86 If the monopoly is suitable to achieve its aim, and in relation to the margin of discretion that each Member State has which cannot be undermined by the existence of less restrictive regulatory approaches elsewhere, the necessity of the monopoly in the absence of harmonisation is indisputable. To find this does not necessitate casting doubt upon the regulatory competence of all Member States in relation to non-monopoly based restrictions to Article 56 TFEU.87 Moreover the Court fails to distinguish whether the difficulties it considers to exist only produce effects in terms of consumers within the regulating Member State or whether consumers in other Member States are affected; can the Court really be suggesting that no Member State can adequately ensure that those it permits to provide gambling services within its jurisdiction are suitable where the operator is not a public body or some other emanation of the state itself? Although the Court did not take the approach of the Advocate General in terms of offering an overly light assessment of compatibility, perhaps the nature of the result is nevertheless comparable. The status of monopolies comparable to that enjoyed by Santa Casa have become further entrenched into the internal market. In doing so the Court seems to have foreclosed the possibility of there being any scope for across the board conditioned mutual recognition in this market, a finding without which the monopoly in question would have still stood solid. 3.2. Commission v. Spain In contrast with the other cases discussed in this contribution, this decision arose from an infringement procedure against Spain in which the European 86 In such cases a licensed based system, such as that in France, would have to comply with, inter alia general case-law on avoiding double regulatory burdens such as Case 279/80, Criminal Proceedings against Alfred John Webb, [1981] ER 3305, para. 17 as incorporated into the gambling related case-law by the Court in para. 73 of Gambelli, ‘is a restriction that goes beyond what is necessary to combat fraud, especially where the supplier of the service is subject in his Member State of establishment to a regulation entailing controls and penalties…’. 87 Ibid., para. 71. The Court came to two further conclusions, the direct relevance of which to this case, and future cases, is unclear. Firstly in para. 70 it noted that due to the ‘lack of direct contact between consumer and operator’ the provision of games of chance via the internet suffer from different and ‘more substantial risks’ of consumers being defrauded by operators compared to ‘traditional markets’. Discussion as to whether online gambling is associated with such higher risks was is not evident in the case report, and internet gambling is not unique in terms of the lack of operator – consumer contact. Slot machines and lotteries where tickets are sold through intermediaries are other possible examples. Secondly, in para. 72, the Court notes that there exists a possibility that if an operator sponsors sporting events upon which it accepts bets then it may be able, directly or indirectly, to influence with outcome of such events with an eye to increasing its profits. 34



Gambling Regulation in the European Union: Recent Developments

Commission contended that fiscal legislation on the taxation of winnings of lotteries, games of chance and betting infringed Article 56 TFEU. The Commission’s case was centered upon the fact winnings from such forms of gambling when organised outside of Spain were subject to income tax. However, Spanish legislation exempted the winnings from the application of this tax when the lotteries and betting were organised by certain Spanish organisations, thus not all operators within Spain. Whilst Member States are competent for the design of rules pertaining to direct taxation, the exercise of such competence should be consistent with Union law,88 and as such the competence-exercise paradigm reflects that prevailing in the restriction of gambling activities themselves. This fiscal rule was found to amount to a discriminatory restriction because it treated the winnings of the specified Spanish organisations more favourably than comparable non-profit making bodies pursuing charitable or social activities in other Member States. Only those organisations established outside of Spain were discriminated against, those which did not have the same objectives as the particular Spanish bodies were not objectively comparable and thus were not to benefit from the Court’s findings that the measure was discriminatory.89 For present purposes it is the approach of the Court in its analysis of the justifications advanced by Spain which is of most interest. Unlike the preliminary reference procedures the Court is far less inclined to defer to the arguments advanced by the relevant national authorities. Undoubtedly this is a result of the nature of the case, but nevertheless this does not provide grounds for ignoring the reasoning of the Court and its understanding of the issues at hand.90Another contrast with the cases discussed herein is that the grounds of objective justification are inapplicable due to the discriminatory nature of the measure, and therefore the measure can only be saved on the basis of the more stringently applied grounds of public policy, public security or public health as found within Article 52 TFEU.91 Four justifications for the discriminatory treatment were advanced by the Spanish authorities; these are now analysed in turn. Firstly, the claim that discriminatory fiscal treatment had the objective of preventing money laundering and combating tax evasion received a brief but telling response from Luxembourg. Essentially the Court reprimanded Spain

88 Commission v. Spain, supra note 16, para. 22. 89 Ibid., paras. 34–35. 90 In contrast to the preliminary reference procedure from within which all of the other cases have arisen the role of the Court in the infringement procedure is to declare whether the particular provision of national law is compatible with the Treaty, in contrast to giving advice to a national court. Therefore, the Court does not show deference to the national level in the same manner as in the preliminary reference procedure. 91 Formerly Article 46 EC. 35

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

for having assumed ‘in a general way and without distinction, that bodies and entities established in another Member State are engaging in criminal activity.’92 Therefore, this objective could not be brought within the remit of the public policy derogation. Yet, this is in stark contrast to the finding by the Court in Santa Casa in which it suggested that the licencing regimes enacted for the purposes of allowing private operators to offer internet gambling could not be relied upon for ensuring the integrity of those licenced; the approach of the Court did not provide scope for distinguishing between different regulatory regimes developed by different Member States.93 Secondly, whilst not denying that combating gambling addiction could fall within protecting public policy the Court noted that Spain had failed to adduce evidence to show that addiction to gambling had reached a level so as to be a danger to public health. This is somewhat in contrast to the subsequent Opinion of Advocate General Mengozzi in Carmen Media who suggested that evidence need not be provided in every case. Yet given that the measure is supposedly designed to combat a threat to public health, it is reasonable to anticipate that the national authorities would have a fairly accurate idea of the magnitude and nature of the problem they were attempting to tackle. Additionally the Court agreed with Advocate General Mengozzi’s finding in this case that the measure was not consistent nor suitable to achieve the given aims; a tax exemption will increase the amount of winnings actually received thus this could be anticipated as being counter-productive in the drive to discourage participation.94 Concluding on this point the Court pointed towards the fact the measure does not distinguish between different forms of gambling thus failing to channel demand towards the less addictive forms.95 This reflects the finding the Court reached in the case of Commission v. Greece concerning a complete prohibition on all forms of games, not exclusively gambling, available in all public and private places (apart from casinos) on the basis of ‘serious social problems’.96 Aside from the fact that not 92 Commission v. Spain, supra note 16, para. 39. 93 Santa Casa, supra note 7, see para. 69 specifically. 94 Ibid., paras. 40–41. Advocate General Mengozzi, in his Opinion delivered on 16 July 2009 noted that: ‘there is little doubt that the main attraction of a game of chance is linked to the amount of potential winnings. By reducing the net winnings, the taxation of winnings from games of chance is likely to make participation in that type of gambling less attractive. … The exemption of winnings is likely instead to encourage consumers to participate in such lotteries, games of chance and betting by making them more attractive than the games of chance organised by entities in which winnings are subject to tax.’ 95 Commission v. Spain, supra note 16, para. 42. 96 Case C-65/05, Commission v. Greece, [2006] ECR I-10341, para. 20 details the dangers to social order as constituting ‘the addiction of the players, the waster of considerable 36



Gambling Regulation in the European Union: Recent Developments

all of the games covered were games of chance and therefore the measure in question could not benefit from the findings of Schindler and Läärä, importantly the Court found that the Greek authorities could have had recourse to more appropriate, less restrictive measures that were applied and executed in a less general more targeted manner.97 Once again this finds resonance in the Opinion of Advocate General Mengozzi in his application of the Gambelli and Placanica cases to the assessment of the consistency of measures in Germany.98 Thirdly, the finding of the Court in Schindler that revenue generated by lotteries is used to finance benevolent or public interest works cannot form an objective justification is applied to the claim that the bodies benefiting from the fiscal exemption use gambling generated revenues for ‘socially-useful infrastructure and projects’.99 Although the Court repeats that such funding is not irrelevant parties are not enlightened as to what the relevance is in terms of justifying restrictive measures. Presumably, since in line with more general case-law, such considerations cannot form an objective justification to an indistinctly applicable measure the scope and degree of any influence this aspect of gambling and lotteries may have is severely limited. Finally, the fourth justification advanced by the Spanish authorities would have required that the protection of social order and consumer protection as adopted in Schindler, Läärä and Zenatti be subsumed within the grounds for derogation provided in Article 52 TFEU. The Court flatly rejected the attempt to extend these grounds to a discriminatory measure before noting the Advocate General’s observations that the measure was unsuitable. Firstly social order would not be protected since participation was encouraged rather than discouraged and secondly consumer protection would not be furthered in the absence of a direct link between the exemption and the measures which supposedly protected consumers.100 Although the distinction between the roles the Court plays in the preliminary reference and infringement procedures should not become hazy, it would be a welcome development in the clarification of the requirements of Union law in terms of the exercise of the national competence to regulate gambling if the Court were to extend this more detailed analytical approach when cases are referred to it by national courts. Whilst it is not claimed that the Court should ignore the margin of discretion which Member States enjoy, the guidance offered to the economic resources, and the easy and illegal enrichment of persons involved in the operation, installation and trade of electronic games and the loss of large sums of money by the players and of considerable tax revenue.’ 97 Ibid., paras. 36–41. 98 See Markus Stoß and Carmen Media discussed in sections 3.8 and 3.9 respectively. 99 Commission v. Spain, supra note 16, para. 43. 100 Ibid., paras. 45–46. 37

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

national court in question could be of a more focussed nature based upon a more critical questioning of reasoning advanced by national authorities. Fortunately Commission v. Spain illustrates that the Court enjoys a considerable degree of insight into the modus operandi of measures regulating gambling; it can only be hoped that it gains confidence to apply them more readily in preliminary reference rulings. 3.3. Betfair 3.3.1. Betfair – the Issues On 17 December 2009 Advocate General Bot delivered his Opinion to the preliminary reference referred to Luxembourg by the Dutch Raad van State arising from the refusal of the Ministry of Justice to award Betfair a licence to operate within the Netherlands. Within the same Opinion the Advocate General covered the questions posed by the Hoge Raad in the Ladbrokes proceedings, although the two cases have not been joined as such by the Registrar of the Court of Justice. Although both proceedings arose out of the same legislative context, namely a regulatory system based upon an exclusive licensing system, to the extent that Ladbrokes differs from Betfair it is discussed separately in the following sub-section. As a preliminary remark, it is notable that the two highest courts within the Netherlands referred overlapping questions to Luxembourg which could well have given a very strange impression within the Court of Justice.101 Whilst this may say more about the relationship between these two domestic courts than the regulation of gambling itself, it nevertheless illustrates the potency of questions pertaining to the relationship between national gambling legislation and the EU legal order. Betfair, which is licenced by the United Kingdom’s Gambling Commission ‘and several other States’,102 sought to attain authorisation from the Dutch Minister of Justice to offer its form of betting services to residents of the Netherlands. In essence this request was rejected whilst the single licences made available for sports-betting and horserace betting were extended to the incumbent operators. Currently, the Wet op de Kansspelen of 1964 (hereinafter ‘WoK’), as amended, provides the legislative framework for the regulation of gambling within the

101 Huls, N., ‘Rechterlijk leiderschap, ontwikkelingen sinds 1988’, in Huls, N. (ed.), Versterking van de cassatierechtspraak door de Hoge Raad, Recht en Samenleving (The Hague; Boom Juridische uitgevers, 2009), p. 14. 102 Opinion of Advocate General Bot in Betfair/Ladbrokes, supra note 59, para. 40. According to the website of Betfair, including the pages which relate to sports-betting as opposed to other forms of gaming and gambling which are offered, such as poker, the ‘other state(s)’ appears to be Australia, or more precisely Tasmania and the Tasmanian Gaming Commission. 38



Gambling Regulation in the European Union: Recent Developments

Netherlands. Article 1 of the WoK establishes that all gambling is prohibited unless a licence has been granted pursuant to the Act. Article 16 establishes a basis for the award of a licence to a single legal entity for the organisation of sports-related prize competitions, and this licence has been held since the possibility for the award of such a licence was introduced in 1961, by the not for profit yet private legal entity; Stichting de Nationale Sporttotalisator, operating under the name De Lotto. Similarly Article 24 of the WoK allows the government to award a single licence for the provision of totalisator betting, which has been held since 1998 by the for profit subsidiary of a US undertaking, ‘Scientific Games Racing’ (hereinafter ‘SGR’) located within The Hague. Both of the licences held by De Lotto and SGR are of a length determined by the government and this may vary from one licensing period to the next. Betfair’s complaint relates to the licence awarded to De Lotto on 10 December 2004 and which expired five years later on 11 December 2009 and that awarded to SGR on 21 June 2005 which was valid for three years, expiring on 30 June 2008.103 Subsequently the licences expired whilst these legal proceedings have been in progress, during which time the incumbent operators have seen their licences renewed, without any changes having been made to the licence award procedure.104 Three questions were referred by the Raad van State seeking to establish the compatibility of

103 For De Lotto see Beschikking van de Minister van Justitie en de Staatssecretaris van Volksgezondheid, Welzijn en Sport van 10 december 2004, nr. L.O. 640/0073/0452482, houdende verlening van een vergunning tot het organiseren van sportprijsvragen, de lotto en cijferspel and for SGR see Beschikking van de Minister van Justitie van 21 juni 2005, nr. 5358571/05/DSP, houdende verlening van een vergunning tot her organiseren van een totalisator. 104 Interestingly, and in contrast to its previous three year licence, SGR was subsequently awarded a five year licence which expires in June 2013 whilst in contrast De Lotto was awarded a two year licence, expiring in January 2012. The licence for SGR was awarded after the reference to the Court of Justice was made but prior to the delivery of the Opinion of the Advocate General, whilst that of De Lotto was awarded during the interval between the delivery of the Opinion and the rendering of the decision by the Court. From the advice given by the supervisory body competent in the field of gambling regulation within the Netherlands, namely the College van toezicht op de kansspelen, it is clear that De Lotto requested a licence of five years but that the Minister of Justice only intended to provide a licence with a duration of two years. It is explained that the Minister’s position is based upon the announcement made to the national parliament in December 2008 that a transparent licensing procedure would be introduced across the national market upon the establishment of an independent Gambling Authority (Kansspelautoriteit). Highlighting the fact that operators within other sectors of the national market had recently been awarded licences lasting five years the College van toezicht advised that the licence should be awarded for a period of five years. Nevertheless the Minister of Justice awarded the licence for two years. For the advice see College van toezicht op de kansspelen, Beschikking Sporttotalisator 2009, 29 October 2009, C. 793/09. Available at: . 39

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

the Dutch regulatory approach with the free movement of services. Firstly the national court sought to ascertain whether Article 56 TFEU precludes the relevant authorities of a Member State, where a closed licensing system is used to regulate the supply of games of chance, from prohibiting a service provider whom has already been granted a licence in another Member State to provide services via the internet within its jurisdiction. Secondly the national court asked whether the principle of equality and the obligation of transparency as applied by the Court within the context of Article 56 TFEU to the award of concessions are applicable to the granting of a single licence for offering games chance. Thirdly, the national court wanted to establish on which grounds the renewal of the single licence to the incumbent without complying with the principle of equality and the obligation of transparency could be a proportionate means to satisfy overriding reasons in the public interest.105

Could this indicate that the government was hesitant as to its chances of a decision which would permit the compatibility of the Dutch approach with Union law to be declared, particularly given the attention focused towards this section by the ongoing infringement procedure of the European Commission into the Dutch sports-betting market? See in this regard; European Commission IP/06/436, Free movement of services: Commission inquires into restrictions on sports betting services in Denmark, Finland, Germany, Hungary, Italy, the Netherlands and Sweden, 4 April 2006 and IP/08/330, Free movement of services: Commission acts to remove obstacles to provision of gambling services in Greece and the Netherlands, 28 February 2008. Correspondence between the European Commission and the Dutch authorities provides further insight and was made available to the lower chamber of the national parliament (Tweede Kamer) in two phases: firstly thee Commission’s letter of formal notice and the Dutch government’s response thereto in Brief minister over (on)verenigbaarheid Wet op de kansspelen met grondbeginsel vrije dienstverrichting EG-Verdrag, Kamerstukken II, 2005/06, 24 557, nr. 74; and secondly the subsequent reasoned opinion and reaction from The Hague are found in Brief minister over het advies van de Commissie van de Europese Gemeenschappen over de Wet op de Kansspelen, Kamerstukken II, 2008/09, 24 557, nr. 98. Unfortunately the advice given by the College van Toezicht regarding the licence of SGR of 22 November 2008, number C.949/07, has not been made publically available in contrast to that pertaining to De Lotto, thus furthering the difficulty of ascertaining the motivations of the national authorities involved in the regulation of this sector. At the time of writing the current licences are Beschikking van de Minister van Justitie van 19 juni 2008, nr. 5551529/08/DSP, houdende verlening van een vergunning tot het organiseren van een totalisator (SGR) and Beschikking van de Minister van Justitie van 14 januari 2010, nr. 5637097/10/DSP, houdende verlening van een vergunning tot het organiseren van sportprijsvragen, lotto en het cijferspel (De Lotto). 105 The Raad van State asks whether this approach is ‘suitable and proportionate’ whilst as discussed the suitability of a restrictive measure was considered to be inherent to the proportionality of such a measure. 40



Gambling Regulation in the European Union: Recent Developments

3.3.2. Betfair – the Opinion In providing a number of general observations, which apply in general terms equally to the Betfair proceeding as to that of Ladbrokes, Advocate General Bot considers that these cases fall squarely and solely within the remit of Article 56 TFEU to the exclusion of Article 49 TFEU on the freedom of establishment given that neither service provider intended to become established within the Netherlands.106 However, this does not do justice to the fact that Betfair had requested a ‘licence to organise, whether or not via the internet, sports-related prize competitions and totalisators on the results of horse races.’107 Proceedings before national courts show how Betfair was interested in obtaining the licences of the incumbent operators, and these licences provide for venue-based gambling services rather than the provision of services solely via the internet.108 This would appear to suggest that in this respect Betfair would have been willing to establish venue based gambling opportunities within the Netherlands so as to be able to meet the requirements which are currently satisfied by the incumbent operators.109 Therefore, to concentrate uniquely upon the freedom to provide services may be considered to constitute an overly narrow focus on the part of the Advocate General. However, such a conclusion cannot ignore the fact that in the absence of the Minister of Justice’s refusal to permit Betfair the opportunity to apply for such a licence Betfair sought then to rely upon the licences it had been awarded by other Union jurisdictions. Whether such a framing of the issues will prove significant depends upon the differences between Articles 49 and 56 TFEU in terms of the ability of a Member State to exercise its margin of discretion and restrict the free movement of gambling service providers and gambling services respectively.110

106 Opinion of Advocate General Bot, supra note 59, para. 50. 107 Ibid., para. 42. 108 Raad van State, LJN BD1483, The Sporting Exchange Ltd (Betfair) / Minister van Justitie, Stichting de Nationale Sportstotalisator and Scientific Racing Games, 14 May 2008. 109 For example, the licence awarded to SGR, Beschikking Totalisator 2005, supra note 103 Article 4 (1) permits SGR to offer horserace betting in the following locations; racecourses, betting offices, betting cafés, sales points, casinos, and lastly gaming arcades (as permitted by the conditions applicable to the arcade owner as determined by the relevant mayor). Article 4(2) permits SGR to conclude betting transactions ‘langs direct elektronische weg’, i.e. through direct means of electronic communication. The 2004 Beschikking Sportotalisator, supra note 103, authorises De Lotto to offer its sports-betting services via a network of sales points and also directly with the consumer via direct electronic communication, following Article 6(2). 110 However, proceedings before the national court in question, see supra note 108, concentrated upon the freedom to provide services. 41

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

Having recalled previous case-law on the grounds upon which Member States may restrict Article 56 TFEU and the margin of discretion which national authorities enjoy in opting for a system of protection which is to be assessed only in light of its objectives and not differing systems in other jurisdictions,111 the Advocate General provides some general observations on the role of competition in gambling markets which largely reiterates his earlier comments in Santa Casa. Firstly, the Advocate General recognises the relative simplicity inherent in the supervision and enforcement of the conditions to which the exclusive right holder must adhere to which simultaneously precludes competition that would otherwise encourage an increase in the volume of services provided and the degree of advertising between numerous operators within a market.112 Whilst the administrative burden will be relatively lighter for the state where there is a single operator within a market compared to a situation with a hundred operators, unfortunately the facts presented in this case do not allude to the burden on the authorities in terms of securing adherence to the conditions attached to the licences held by De Lotto and SGR other than the compliance assessment upon the occasion of the renewal of the semi-permanent licence. Yet the assertion that a monopoly provider will ensure that the dangers of ‘the market overheating’ do not arise must be qualified;113 operators such as De Lotto and SGR do not have a monopoly over the entire national market, but rather a narrow segment of that national market. To the extent that the services offered by De Lotto and SGR are substitutable they will be in competition within one another, even though, from a legal perspective these are monopolists operating in wholly separate, formally distinct, markets.114 If a Member State were to divide its national market into numerous narrowly defined markets, each supplied by 111 Opinion of Advocate General Bot, supra note 59, paras. 50–56. 112 Ibid., para. 57. 113 Veenstra talks about the risk of ‘overheating’ in reference to the Opinion of Advocate General Gulmann in Schindler, supra note 54, delivered on 16 December 1993. See Veenstra, T., ‘State Licensed Lotteries and Toto Companies in the Legal and Political Debate in the European Union’, in Littler, A. & Fijnaut, C., The Regulation of Gambling: European and National Perspectives (Martinus Nijhoff, Leiden, 2007), 53–67, at p. 55. 114 Competition between these two markets should not be unexpected given than in other jurisdictions operators are permitted to offer betting on sports events and betting on horse races. Whilst the fact that other Member States organise their markets differently than the Netherlands cannot be used in an assessment of the need for and proportionality of the approach embodied in the WoK this should not be used to detract a priori from the underlying issue of demand-side substitution between gambling services and thus the potential for competition between services. This issue is not theoretical, given that the incumbent sports-betting operator requested changes to its licence conditions so as to be able to compete more equally with other operators within the Dutch domestic market. See College van toezicht op de kansspelen, Beschikking Sporttotalisator 2009, supra note 104, where it is stated on p. 1: 42



Gambling Regulation in the European Union: Recent Developments

a single licence holder, then there would be a greater probability of competition between the different markets than if these markets were more broadly defined.115 In this respect the design of the Dutch market differs considerably from that prevailing in Portugal, where Santa Casa enjoyed monopoly status for the supply of lotteries, lotto games and sports-betting (both on and off line), which includes betting on horse races. In addition to sports-betting De Lotto can also offer lotto games and also instant lottery products. Both instances provide ground for a degree of inter-brand intra-operator competition. The situation of De Lotto is distinguishable from that of Santa Casa by way of SGR’s offering which is an example of how competition could arise not only between brands but also between operators and thus markets otherwise characterised by their monopoly structure.116 In common with his Opinion in Santa Casa the Advocate General reiterates his position that competition does not per se have a role to play in the regulation of gambling ‘because in the Community legal order competition is not an end in itself. It is a means of attaining the objectives pursued by the Community, as set out in Article 2 EC.’117 He then proceeds to explain why competition between



‘Met betrekking tot de wijzigingsverzoeken van De Lotto merkt het College op date deze vooral voortkomen uit de wens van De Lotto om op de Nederlandse markt voor loterijen te komen tot een meer gelijkwaardige concurrentiepositie voor alle partijen (level playing field).’

115 Perhaps the distinctions made between different parts of the overall national market could be thought of in terms of formally distinct and functionally distinct. Whereby the term ‘formally distinct’ would capture the division of the national market along legal lines in terms of (exclusive) licences granted for a particular form, or forms, of gambling. Concurrently, the term ‘functionally distinct’ would refer to the degree to which the markets are distinguishable from the perspective of market forces. In this respect perhaps the degree of substitution between the different gambling services as perceived by consumers would be of significance. Further research would be needed to ascertain whether formal divisions are reflected in the functional divisions prevailing within the market place. 116 Indeed, De Lotto currently holds three of the exclusive licences which the WoK permits the appropriate ministries to grant to undertakings. However, there is no condition within the WoK which requires that these three are granted to a single operator. Whilst the WoK requires that the licence granted pursuant to Article 27b(1) for lotto games is granted to the same undertaking which holds the licence for sports-betting pursuant to Article 16(1), the licence for instant lotteries pursuant to Article 14b(1) is not dependent on such a connection to the sports-betting provider. Thus, in theory, an additional monopolist could enter the Dutch market if De Lotto were to loose its monopoly status over either the sports-betting and lotto markets or the instant lottery market. Yet the probability of this scenario arising is diminished by the lack of any competitive tendering procedure for the semi-permanent licences upon which the monopoly positions are secured. 117 Opinion of Advocate General Bot, supra note 59, para. 58. 43

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

operators in this sector would not further the objectives of the Union because of the danger of excessive gambling, noting that when interpreting the freedoms of movement the Court should not require Member States to open their markets to competition ‘because it is not a source of progress and development.’118 Refining this point subsequently he considers that a Member State should only be required to open a particular form of gambling to ‘free competition’ when the decision has been taken at the national level ‘to make that form of gambling a normal or ordinary economic activity in which the primary object is to make the maximum profit.’119 Regrettably the Advocate General is vague as to the recipients of these profits; are they private operators, the state in terms of taxation revenue or the beneficiaries of revenues generated and specifically earmarked for ‘good causes’? Indeed, as the Advocate General pointed out in his Winner Wetten Opinion in reference to this particular case, the creation of new games and advertising has to be ‘strictly controlled by the Member State and limited so as to be compatible also with pursuit of the aim of protecting consumers against addiction to gaming.’120 Moreover in determining whether national policy satisfies the consistent and systematic test requires an analysis by the national court as to the ‘practical effects of that legislation’121 and ‘its actual effects on consumers’.122 Attention has to be cast towards the exercise of national policy, and not merely that which stands on the statute books. 3.4. Ladbrokes 3.4.1. Ladbrokes – the Issues The prevailing issues in Ladbrokes exemplify the relationship between national policy choices and internet-based trade; whilst Member States are free to determine the objectives of gambling policy the effective implementation of that policy in an inherently international context generates issues of its own.123 The Opinion of Advocate General Bot will be considered before placing this particular preliminary

118 Ibid., para. 60. 119 Ibid., para. 62. 120 Opinion of Advocate General Bot in Winner Wetten, supra note 17, para. 52. 121 Ibid., para. 53. 122 Ibid., para. 54. 123 Indeed, Advocate General Mengozzi in the case of Carmen Media, supra note 10, noted that the ‘new technologies make this legal problem more complex. … Online gambling knows no boundaries. Gamblers are no longer limited solely to the gambling offered in their own Member State…’. However ‘it is not only online gambling which causes problems’ but also public monopolies and conditions attached to the attainment of a licence, paras. 2–3. 44



Gambling Regulation in the European Union: Recent Developments

reference within the broader context of giving effect to the supremacy of national policy preferences in internet-trade regimes. To a considerable extent the factual elements of this case are extremely similar to those giving rise to the Betfair proceedings which have been discussed above. Whilst seeking to avoid superfluous repetition the distinguishing features of this preliminary reference are as follows. This case formally relates solely to the exclusive licence granted pursuant to Article 16 of the WoK for sports-betting related services, as is currently held by De Lotto. The case does not explicitly deal with the single licence awarded to SGR for totalisator betting although the legal basis for this monopoly is seemingly equivalent to that for sports-betting services. However the significance of this maybe mitigated by the issue at the heart of the preliminary reference; namely whether an injunction to give effect to a particular choice of regulatory regime is itself compatible with Union law. It should not be forgotten however that the injunction, granted by a national court, will only secure protection of the national market in relation to the market sector within which the complainant is authorised to act, and not other sectors supplied by other entities, regardless of the similar legal foundation upon which adjacent monopolies stand. Attempting to secure the effectiveness of the national regulatory regime through reliance upon legal action being undertaken by the holder of the exclusive right in question is liable to be limited from an overall national market perspective, a limitation which shall be discussed below. Nevertheless the effectiveness of the means of defence should not be confused with the object which is being defended; the regulatory regimes prevailing in other sectors in the Netherlands which are similarly premised on the single licensing model will remain unaffected in terms of compatibility with Union law. Yet they will also remain directly unaffected by any success De Lotto achieves in securing this injunction and the protection of its monopoly which will flow there from. Three questions were raised by the Hoge Raad, the first of which draws heavily upon the cases of Gambelli and Placanica. In this question the national court asks whether a restrictive policy aimed at channelling the propensity to gamble ‘and which in fact contributes to the achievement of the objectives pursued by the national legislation in question’ satisfies the consistent and systematic requirement established in Gambelli when the licence holder is permitted to offer new games, advertise and thus keep (potential) gamblers away from unlawful providers. The second question seeks guidance on the use of an injunction to give effect to the restrictive national measures. On the assumption that the national legislation is compatible with Article 56 TFEU the national court asks whether on every occasion that a measure of this nature is granted that the court, in light of the specific circumstances of the case, must assess whether an injunction would serve the objectives justifying the restrictive measure and whether the consequent restriction is proportionate with such objectives. Furthermore the court requests guidance on whether the source of the authority requiring the

45

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

blocking of the service is of any significance for Union law, in terms of whether it be a measure of a national authority or a national court in the context of a civil action initiated by the current single licence holder. Finally, the third question is essentially the same as the first question referred by the Raad van State a month previously. Consequently questions one and two will be dealt with below, whilst the response of Advocate General Bot to the third question has been considered above in relation to Betfair. 3.4.2. Ladbrokes – the Opinion The first question seeks elucidation on in how far an exclusive right holder can ensure the attractiveness of their offer in terms of introducing new games and relying upon advertising within a regime which seeks to curb both addiction and prevent fraud, thus seeking to reconcile the judgements of Gambelli and Placanica.124 The objective advanced in Gambelli was to avoid excessively inducing participation in gambling whilst in Placanica the Court of Justice separated the different grounds for justification; and in this instance the principal concern was to starve demand for illegal gambling through the creation of a legal avenue. This has led the Hoge Raad to seek advice on how to manage dual or multiple objectives following the significant separation of the grounds for justification in Placanica.125 The significance of this question lies in assessing the compatibility of a restrictive measure with Union law, with such compatibility depending upon the suitability of the measure to obtain the given objective, which must be achieved in a consistent and systematic manner.126 Referring to Läärä and Zenatti Advocate General Bot opined that the suitability of the measure for attaining the two objectives ‘must be assessed by reference to both of them together’,127 thus the suitability of the measure and its application to protect consumers from addiction to gambling whilst also preventing fraud. Indeed, Placanica shows that it is consistent with the objective of fraud prevention to offer an extensive range of games, offer new games and advertise so as to channel consumers’ into regulated supplies in the hope that a substitution effect starves the illegal suppliers of their custom. Advocate General Bot views the situation as one where the legal supply is ‘sufficiently attractive to satisfy the gaming wishes of the greatest number’. If the Court were to heed these words it would suggest that for a measure to be consistent and systematic, and thus suitable, it would have to be responsive to the forms of gambling demanded by the public; what if there was a high propensity

124 Opinion of Advocate General Bot, supra note 59, para. 67. 125 See Hoekx, N., ‘Placanica: Combating Criminality v. Reducing Gambling Opportunities’, supra note 33, p. 79. 126 Opinion of Advocate General Bot, supra note 59, para. 69. 127 Ibid., para. 74. 46



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of the public to participate in a form of gambling which no legal supplier could provide? Would the lack of a possibility to provide such a form denote that the measure (i.e. the lack of a legal basis to provider a particular form of gambling) was unsuitable to attain the advanced objectives?128 The issues raised in Ladbrokes reflect the difficulties which Member States have in enforcing their preferences in terms of the nature of gambling activities permitted within their jurisdiction. In essence it is a reflection of how ‘[c]yberspace radically undermines the relationship between legally significant (online) phenomena and physical location’ in terms of both the ability of national regulations to be set aside by the operator-consumer relationship and the difficulties faced by national authorities to give effect to national regulations, including prohibitions.129 The enforcement of domestic gambling legislation on an injunction-by-injunction basis is likely to be relatively ineffective, given the limitations inherent in the injunction awarded by the national court requiring Ladbrokes to cease offering sports-betting services to residents of the Netherlands.130 Such ineffectiveness is twofold; firstly the injunction only relates to Ladbrokes. As such it does not have an affect on all the other operators regulated and licensed by the same jurisdiction as Ladbrokes, nor those regulated elsewhere within the internal market, nor those regulated by jurisdictions outside of the EU and neither by operators who are not regulated by any jurisdiction. Secondly, the injunction only applies to the forms of gambling which De Lotto is permitted to offer under the domestic legislation in question. Pursuant to the WoK De Lotto is only permitted to offer sports-betting,

128 It is not unknown for there to be a disconnect between the forms of gambling for which there is demand and those forms which are legally supplied within a Member State. For example, there is a considerable degree of participation by residents of the Netherlands in internet gambling services, which cannot be legally supplied within this Member State. See Homburg, G.H.J., & Oranje, E., Aard en Omvang van Illegale Kansspelen in Nederland, Regioplan, Amsterdam, July 2009. This report estimates that 5.1% of the Dutch population participated in online gambling within the timeframe studied. Out of a population of approximately 16.6 million this amounts to between 547,000 and 581,000 persons between the ages of 15 and 65 years. See pages 2–3 of the Samenvatting. For population figures BBC News, The Netherlands Country Profile, available at . 129 Johnson, D.R. & Post, D., ‘Law and Borders- The Rise of Law in Cyberspace’, 48 Stanford Law Review, (1995–1996), 1367–1402, p. 1370. 130 In this respect the experience of the Dutch authorities reflects those of their US counterparts. Reidenberg refers to the case of People v. World Interactive Gaming where the state of New York secured an injunction against an offshore internet casino but that ‘the victory did not appear to stem the flow of illegal Internet gambling in New York.’ The author then notes that regulatory attention turned to the payment system. See Reidenberg, J.R., ‘Technology and Internet Jurisdiction’, 153 University of Pennsylvania Law Review (2004–2004), 1951–1974, p. 1960. 47

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

lotto and scratch card based gambling services.131 The injunction awarded only reflects the forms of gambling which Ladbokes’ activities were competing with and thus posed unfair competition for De Lotto. Consequently, all other forms of gambling which are offered by Ladbrokes were not subject to the injunction, and are still available in the Netherlands. Indeed, on the website of Ladbrokes under the tab ‘restricted territories’ it is stated ‘[f]or individuals resident in Holland – we accept only horse racing, greyhound racing and casino bets, and not lotto or other games or sports bets.’132 Thus, whilst horserace betting is subject to the same exclusive licence regime as that applicable to sports-betting, because this licence is held by a party other than De Lotto, namely SGR, the Dutch domestic horserace betting market remains de facto open to competition from Ladbrokes. Aside from the compatibility of the Dutch regulatory regime, the fact that it was a private operator rather than the public authorities which sought to exclude Ladbrokes from the Dutch market it would appear that SGR would have to be relied upon to enforce, through an application for a similar injunction, the exclusivity of the licencing regime upon which the Dutch regulatory approach to horserace betting is based. Questions may arise as to the efficacy of domestic enforcement measures if the public authorities leave it to private operators holding exclusive rights to give effect to the ‘no competition on the market’ approach, which is a key element of this regulatory regime. Moreover, other forms of gambling which fall outside of De Lotto’s portfolio may offer indirect competition to those which De Lotto is authorised to offer, to the extent that horse racing, greyhound racing and casino bets are substitutable on the demand side for sports-betting, lotto and scratch cards. 3.4.3. Ladbrokes – Exercising Jurisdiction over the Internet This injunction is an attempt to effectively assert domestic jurisdiction over internet-based trade and counter the seemingly borderless environment that is the internet,133 and thus contradict the notion that the internet is a system that ‘is indifferent to physical location.’134 In the same vein moves by the Dutch government to require that internet service providers (ISPs) block access for residents of the Netherlands to gambling

131 Wet op de Kansspelen, Article 14b(1) provides for a single operator of the instant lottery (scratch cards) and Articles 16(1) and 27b(1) do likewise for sports-betting and lotto services respectively. 132 See ‘Restricted Territories’ at . 133 See generally Goldsmith, J. & Wu, T., Who Controls the Internet? Illusions of a Borderless World (Oxford: Oxford University Press, 2006). 134 See Johnson & Post, supra note 129, p. 1371. If as a system the internet was considered to be indifferent to location then asserting jurisdiction on a territorial basis becomes impossible if the relevant territory cannot be identified. 48



Gambling Regulation in the European Union: Recent Developments

websites and likewise to place financial service providers under an obligation to block payments for gambling services represent attempts to partition the Netherlands from internet based gambling services offered in other jurisdictions. Enforceability of national preferences is a key point, and the potential of geolocation software to give effect to jurisdictionally differentiated regulatory regimes could appear to offer a means to enforce national preferences over internet-based trade.135 However, how could the Netherlands give effect to the requirement that operators licensed and regulated in other jurisdictions utilise this software and subsequently refuse to serve would-be customers whose ISP-address identifies their location as being in the Netherlands? Arguably the Netherlands would not be able to do this unilaterally, and thus this suggests that a degree of coordination and cooperation would be required between regulatory bodies at an international level. Yet a role would still exist within the European context; to the extent that the restrictions to the free movement principles are compatible with Union law regulatory bodies in other Member States could be encouraged to include, possibly in the form of a licensing condition, that operators are not permitted to offer their services to residents in the Netherlands. The Dutch authorities could coordinate with their European peers to establish a licence condition that geolocation software is utilised.136 Such a construction returns the narrative to the need for efforts in cooperation and coordination between national regulatory bodies so as to give full effect to both the supremacy of the free movement principles and the national margin of discretion in setting regulatory objectives and standards. In other words, even if a Member State opts for a prohibition the authorities of that state would nevertheless need to engage in cross-border cooperative efforts. The rise of such an approach would mark a reversal of early perceptions of internet regulation, including the nature of the relationship between the citizen and the state, according to the ‘borderless Internet perspective’ in which national governments lacked the authority to regulate citizens’ activities, citizens who were able to ‘move between online spaces without regard to national borders.’137 Earlier literature on the interaction between jurisdiction and the internet perceived a 135 King, K.F., ‘Geolocation and Federalism on the Internet: Cutting Internet Gambling’s Gordian Knot’, Columbia Science and Technology Law Review, Vol. XI, 2010. Available on SSRN at . 136 Whether only geolocation software should be relied upon is an issue for national authorities to determine, depending on the accuracy of the software. Estimates quoted by King suggest that the software correctly locates internet users between 85% and 95% of the time. 137 Geist, M., ‘Cyberlaw 2.0’, 44 Boston College Law Review (2002–2003), 323, p. 331. This article also discusses the assertion by Australia of jurisdiction over off-shore providers of internet-based gambling by creating an offence for intentionally providing an interactive service with a customer physically present in Australia, see p. 347. 49

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

restricted role for sovereign entities to regulate internet-based conduct, recognising that territorially based legal systems would be reluctant to cede jurisdiction to the yet to be constructed regulatory architecture of cyberspace.138 However, it has subsequently been recognised that the relationship between law and technology is characterised by a degree of dynamism,139 and thus it is unwise for legal systems to consider that technology is static. In light of geolocation software and the establishment of geographic contours within internet-based trade Reidenberg notes that ‘just as the Internet attack uses technological infrastructure to challenge jurisdiction, technological innovation empowers sovereign states to assert their rules on Internet activity.’140 Moreover, Reidenberg subsequently claims that technological capabilities in terms of the internet must be driven by the rule of law and public values rather than ‘technological determinism’.141 Such an understanding validates the division of internet-based trade along national boundaries, so as to give effect to national policy choices, which is wholly in line with the substantial margin of discretion which Member States enjoy when regulating internet-based gambling. Ladbrokes represents an attempt to assert jurisdiction over internet-based trade which would otherwise undermine the policy preferences of gambling regulation in the Netherlands. The validity of more active measures, such as blocking financial transactions represents a more pro-active defence of such regulatory preferences, and the validity of which from a Union law perspective will rest upon whether the underlying restriction is objectively justifiable. 3.5. Winner Wetten 3.5.1. Winner Wetten – the Issues The controversy which has been miring the regulation of gambling in Germany over the past decade or so is encapsulated by the Staatsvertrag zum Lotteriewesen

138 See Johnston & Post, supra note 129, who at p. 1394 write: ‘It may be most difficult to envision local territorial sovereigns deferring to the law of the Net when the perceived threat to local interests arises from the very flow of information that is the Net’s most fundamental characteristic – when, for example, local sovereigns assert an interest in seeing that their citizens are not adversely affected by information that the local jurisdiction deems harmful but that is freely (and lawfully) available elsewhere.’

If one replaces references to the ‘law of the Net’ with the ‘law of a jurisdiction authorising online gambling’ and ‘information’ with ‘gambling services’ then the current predicament is concisely described.

139 Reidenberg, supra note 130, p. 1951. 140 Ibid., at p. 1960. 141 Ibid., at p. 1971. 50



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in Deutschland (hereinafter referred to as ‘Interstate Treaty on Gambling’) which entered into force on 1 July 2004. Essentially it establishes a uniform framework for the organisation of games of chance throughout all of the Länder; the provision of which may be entrusted to either public law or private law companies in which a public authority is the majority shareholder.142 Concurrently, federal legislation establishes the freedom for individuals to choose their occupation or profession, a freedom which essentially has come to clash with criminal penalties applicable to the provision of gambling services without the requisite administrative authorisation.143 In 2006 the Bundesverfassungsgericht (Constitutional Court) found that the Interstate Treaty was not fit for purpose, in other words, it did not obtain the objectives which were put forward as justifications for restricting the right to occupational freedom.144 The Constitutional Court prolonged the application of the Interstate Treaty until 31 December 2007 on condition that the organisation which provided sports-betting services established a degree of consistency between the exercise of its monopoly status and the attainment of the given regulatory objective; namely combating addiction. At this point, Advocate General Bot notes that the requirements of the Constitutional Court and the Court of Justice in Gambelli converged.145 A reformed version of the Interstate Treaty, the Glücksspielstaatsvertrag, entered into force on 1 January 2008.146 Although the organisation of sports-betting in Bavaria gave rise to the decision of the Constitutional Court the regulation of the same activity in NordrheinWestfalen acted as the catalyst for this particular preliminary reference. Within its jurisdiction only a single operator was permitted to offer sports-betting within Nordrhein-Westfalen whilst concurrently Winner Wetten acted as a local intermediary within the Länder for a Maltese licenced operator. Proceedings ensued to prevent the continuation of Winner Wetten’s operation, but the operator claimed that the regulation of gambling in Nordrhein-Westfalen failed the ‘consistent and systematic’ test established in Gambelli and was thus incompatible with Article 56 TFEU. The lack of consistency arose out of the same grounds as were applicable in Bavaria, namely that the Länder’s monopoly was only compatible with Union law if it actually limited sports-betting, which it allegedly failed to do given the degree of advertising engaged in by the monopoly operator.

142 Opinion of Advocate General Bot, supra note 17, para. 8. 143 The legal proceedings which led to the establishment of this Treaty are discussed in the contribution by Becker to this book; Recent Developments in German Gambling Law. 144 As discussed in Becker ibid., the legislation of the state of Bavaria failed to combat addiction to sports-betting and restrict the passion for betting, and therefore the state monopoly was an unjustifiable restriction. 145 Opinion of Advocate General Bot, supra note 17, para. 19. 146 See Becker, supra note 143. 51

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

According to the referring court, the Verwaltungsgericht Köln, the establishment of the transitional period during which the regulation of sports-betting was to be reformed so as to be consistent with the requirements of national law was insufficient for the purposes of correcting the incompatibility of the regulatory regime with the Union law. Therefore, the national court referred two preliminary questions. In essence it sought guidance on whether national rules which restrict the freedom of establishment and the freedom to provide services can remain in force during a transitional period given that they failed to restrict gambling in a consistent and systematic manner, notwithstanding the primacy of the Treaty. Should such derogation be permissible the court then sought advice on the conditions to be met to permit such a derogation. As a preliminary remark, this case is concerned with the exercise of the margin of discretion Member States enjoy with the potential for considerable implications for European constitutional law, rather than the demarcation of the scope of that margin in contrast to earlier cases. Given the ‘iconic feature’ which primacy has in Union law,147 and the central role it plays in the legal order of the internal market and Union more generally should the Court of Justice find that the transitional period is compatible with Union law this will have profound consequences beyond the realm of questions concerning the regulation of gambling. Will the Court really be willing to allow for the temporary derogation by national legal orders from the application of Union law, thus possibly depriving it of its character as Union law and calling into question the entire legal basis of Union?148 As such it is illustrative of the evolution of the dialogue between national courts and the Court of Justice in respect of gambling. A response, in part perhaps, to the lack of legislative discourse at the Union level. 3.5.2. Winner Wetten – the Opinion Although Advocate General Bot doubts the premise that the legislation is contrary to Union law,149 he recognises that such a conclusion is for the referring court to draw and even in the event that national court may subsequently reach the opposite conclusion, he considers that the questions referred are admissible. The gist of the Opinion, should it be followed by the Court, will prevent Germany from maintaining a period during which it can derogate from its obligations

147 Lenaerts, K. & Corthaut, T., ‘Of birds and hedges: the role of primacy in invoking norms of EU law’, European Law Review 2006, 31(3), 287–315, p. 289. 148 In Case 6/64, Costa v. ENEL, [1964] E.C.R. 584 the Court held that ‘the law stemming from the Treaty, an independent source of law, could not, because of its special and original nature, be overridden by domestic provisions, however framed, without being deprived of its character as Community law and without the legal basis of the Community itself being called into question.’ See p. 594 of the judgement. 149 Opinion of Advocate General Bot in Winner Wetten, supra note 17, paras. 34–36. 52



Gambling Regulation in the European Union: Recent Developments

in respect of Union law, with the Advocate General basing his position on the primacy of Union law and securing effective judicial protection for individuals. In other words, the Advocate General does not provide grounds for an exception to the Simmenthal position in which a national court is obliged to give effect to a directly applicable rule of Union law where conflict arises with a provision of domestic law.150 Whilst the test as to the consistent and systematic nature of the restrictive measure in question converged in terms of the requirements of the Constitutional Court and the Court of Justice, the court in Cologne found itself to be the meeting point for two opposing requirements from these two ‘higher’ courts. Firstly in terms of the transitional period imposed by the Constitutional Court requiring the legislation to be adhered to until 31 December 2007 and secondly the need to prevent a ‘gap in the law’ from arising which would be detrimental for those whom the legislation in question was designed to protect.151 With respect to the transitional derogation, and hereby referring to Simmenthal, the duty of the national court to set aside the offending provision of national law cannot itself be set aside for a limited period of time.152 The fact that the Constitutional Court may have chosen to defer the consequences of the inherent inconsistency within national law provides no route for alleviating the referring court from ensuring the effectiveness of Article 56 TFEU.153 Consequently, the provisions in question should not be applied to undertakings ‘such as Winner Wetten’ who seek to rely on the freedom to provide services.154 Turning to the need to avoid a legislative gap, the Advocate General is critical of the reasoning advanced by the national court. Somewhat unfortunately no comment is drawn from the Advocate General as to the motivation for avoiding this said gap; namely to avoid sports-betting operators established in other Member States to supply their services to residents of Nordrhein-Westfalen ‘without any regulatory measures other than those in force in their State of origin.’155 Although the legislation is subsequently questioned in terms of securing the objectives no thought is given to the efficacy of the regulatory measures of other Member States in achieving these objectives. Under the heading of ‘obstacles of principle’ the Advocate General favours forward looking temporal modifications to the effects of Union law within

150 Case 106/77, Simmenthal, [1978] ECR 629. 151 However, given the doubts as to the suitability of the measure in question, this line of reasoning later fails when analysed by the Advocate General. See para. 113. 152 Opinion of Advocate General Bot in Winner Wetten, supra note 17, paras. 70–71. 153 Ibid., paras. 72–73. 154 Ibid., para. 74. 155 Ibid., para. 76. 53

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

national legal orders because such effects have hitherto been retroactive. 156 Any temporal derogation which maintains the life of a measure incompatible with Union law would undermine the ‘very essence of Community [Union] law.’157 Within the particular context of the preliminary reference procedure this would undermine the effective and uniform application of Union law,158 negating the right an individual, such as Winner Wetten, has to an effective judicial remedy.159 As already noted above, the national court found that the measure did not restrict sports-betting in a consistent and systematic manner, thus failing to protect consumers against excessive gambling. Therefore, given that the legislation was not fit for purpose, the claim that it should still be given effect so as to prevent a gap in the law from arising was dismissed by the Advocate General.160 Consequently, should the Court of Justice follow the Advocate General this case will serve to remind national authorities that the Union law cannot be derogated from for a temporary period of time; indeed such temporality will not secure the compatibility of a restrictive measure which is incompatible with the free movement provisions. 3.6. Sjöberg and Gerdin 3.6.1. Sjöberg and Gerdin – the Issues This preliminary reference from the Svea hovrätt has quite a narrow focus and the final ruling of the Court will have little impact upon the scope of the regulatory margin of discretion compared to the other preliminary references discussed here. The case concerns the advertisement of gambling services and the treatment which advertisers based in Sweden receive when advertising illegal sports-betting services offered from outside of Sweden compared to domestic unlicenced gambling services. The publishers of two Swedish newspapers carried advertisements promoting gambling services offered by companies established in Malta and the United Kingdom. This was in contravention of Swedish gambling law and rules relating to the advertisement of gambling services. Swedish gambling regulation aims to secure a safe gambling market within which objectives relating to social protection can be obtained in addition to the prevention of crime and fraud. Furthermore, 156 Ibid., para. 85. 157 Ibid., para. 99. 158 Ibid., para. 101. 159 Ibid., para. 103. 160 Ibid., paras. 112–113. Additionally, as Advocate General Bot observes in para. 114, according to the national court the measure was contrary to the consistent and systematic requirement of the Gambelli case which had been rendered 18 months prior to the introduction of the offending legislative provisions. 54



Gambling Regulation in the European Union: Recent Developments

Swedish operators are prohibited from making a profit, with revenues generated destined for the benefit of society. The lottery market is supplied pursuant to a monopolist approach whilst the betting market is structured around a duopoly; two public operators with one providing sports-betting services and the other horserace betting services. Offering gambling services without a licence is a criminal offence, as is promoting foreign gambling services in Sweden, which in part is intended to direct profits from gambling to objectives in the public interest.161 As editors-in-chief and publishers of two newspapers, Mr Sjöberg and Mr Gerdin were fined for ‘promoting intentionally, in an unlawful manner and for profit, participation in games of chance organised abroad’.162 During the course of domestic proceedings the national court referred a total of five questions to Luxembourg: 1. Whether discrimination on the grounds of nationality can be accepted on the basis of overriding reasons in the general interest; 2. If the financing of social activities is one of a number of policy objectives can such financing equate to an incidental beneficial consequence; 3. Whether reliance can be placed on overriding reasons to justify a restrictive policy where state-controlled companies advertise gambling, the revenue of which accrues to the state, and where one of the objectives of such advertising is generating revenue for social activities; 4. Whether a total prohibition on the marketing of gambling by an operator regulated in another Member State is proportionate to the objective of controlling and supervising such activities when no restrictions are in place in Sweden on domestic operators; and 5. Can operators, established and regulated in other Member States market themselves through advertisements in newspapers in other Member States without first obtaining a licence from the Member State where the advertisements are received? 3.6.2. Sjöberg and Gerdin – the Opinion Similar to the case of Winner Wetten a national court is faced with discriminatory restrictions and seeks to establish the compatibility thereof with the internal market. However, Advocate General Bot in his Opinion delivered on 23 February 2010 amalgamates the issues into two; the compatibility of the ban on advertising and the nature of the criminal penalties.

161 Sjöberg and Gerdin, supra note 18, para. 28. 162 Ibid., para. 29. 55

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

Relying upon the Santa Casa decision the Advocate General concludes that the domestic prohibition on promoting gambling offered outside of Sweden is proportionate with the regulatory objectives.163 Indeed, whilst this decision related to protecting consumers against the risk of crime and fraud the Advocate General considers that Member States are able to disregard the regulatory efforts of other Member States even if their regulatory regime is not appropriate for securing other regulatory objectives ‘such as the protection of consumers against excessive incitement to gamble’.164 Moreover the Advocate General seeks to extend this approach to restrictions which are less restrictive than a total prohibition. Thus, so long as a Member State includes the objective of protecting consumers from crime and fraud in the supply of gambling services, then the appropriateness or suitability of other measures for achieving other objectives is seemingly irrelevant. This is reminiscent of the Advocate General’s approach to the assessment of a restrictive measure in Santa Casa, seeking only to catch those which are manifestly restrictive, and it becomes even more apparent to him that the prohibition ‘on advertising internet gaming offered by companies established in other Member States may therefore be regarded as justified by the objective of combating fraud and crime, irrespective of whether those rules are in fact proportionate to’ the other objectives of the Swedish regulatory regime.165 In one foul swoop preliminary questions two to five are answered and the proportionality test appears to be effectively sidelined; a restriction need only to be effective in preventing consumers being the victims of fraud and crime perpetrated by operators. So long as the regulatory model can withstand this test any other objectives in the public interest seemingly need not be scrutinised. Attention is then turned to the first preliminary question which relates to the compatibility with Article 56 TFEU of the difference in treatment in terms of punishment Swedish law accords to the promotion of gambling which is not supplied by the holders of an exclusive right. When internet-based gambling is promoted in Sweden but is organised by companies established in other Member States the promoter thereof is subject to criminal penalties, as in the cases of Mr Sjöberg and Mr Gerdin. However, unlicensed gambling which is organised within Sweden cannot lead to criminal penalties for the promoter thereof. The Advocate General notes that the duty upon Member States not to impose discriminatory rules extends to measures ‘intended to protect consumers against the particular risks posed by internet gaming.’166 Whereas the prohibition applies without distinction to all non-licenced gambling a distinction is drawn in terms of the penalties applicable, which are determined by the location of the 163 Ibid., paras. 60–61. 164 Ibid., para. 64. 165 Ibid., para. 72. 166 Ibid., para. 75. 56



Gambling Regulation in the European Union: Recent Developments

gambling operator. Should the national court find that this distinction applies in practice, then so as to give effect to Article 56 TFEU the criminal provisions will be unenforceable against the two publishers in question.167 Once again, as in the case of Santa Casa intended measures to give effect to restrictions appear to be incompatible with Union law rather than the underlying restriction. The measures in Santa Casa were not notified under the Information Society Services Directive whereas those in question here could well entail a ‘difference in treatment of comparable situations, to the detriment of companies established in other Member States.’168 The Advocate General proceeds to note that prosecution of those promoting gambling abroad will have a greater effect on operators established outside of Sweden, which is in line with earlier case-law of the Court. However, he notes that there are no materially demonstrated differences between the two types of unlicensed gambling so as to justify any difference in treatment and went on to state that: ‘internet gaming organised by a company established in another Member State does not necessarily or in general pose greater risks of fraud and crime to the detriment of consumers than gaming organised clandestinely by a company established within the national territory.’169 Assuming that the operator established in the other Member State is licensed and regulated in that Member State for the provision of gambling services via the internet it is unclear upon which basis the Advocate General is able to equate such regulated service providers with clandestine domestic providers. Restricting the provision of gambling services to the holders of exclusive rights may be suited to the achievement of avoiding the generation of private profit through gambling, which is an objective of the Swedish regime. From the perspective of this objective the generation of private profits for foreign operators or clandestine operators will likely have an impact upon revenues generated for good causes. Yet the Advocate General concentrates solely upon the objective of combating this particular type of crime and fraud; are the consequences in terms of crime and fraud likely to be comparable between operators regulated abroad and domestic clandestine operations? Arguably this is a dangerous assertion to make and one which can be criticised for its over-inclusivity in the same manner as the Court’s dismissive attitude in Santa Casa towards attempts by some Member States to regulate private online operators.

167 Ibid., para. 82, giving effect to Simmenthal, supra note 150. 168 Ibid., para. 83. 169 Ibid., para. 87. 57

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

3.7. Engelmann 3.7.1. Engelmann – the Issues The case of Ernst Engelmann relates to questions surrounding the compatibility of Austrian regulations applicable to casino operations with both Articles 49 and 56 TFEU. In particular, the preliminary reference by the national court seized of the matter, the Landesgricht Linz, relate to three elements of the Austrian regulatory regime. Firstly that undertakings offering casino gaming in Austria must be established in Austria; secondly, the limitation of concessions for operating casinos to 15 years; and thirdly, the possibility of concession holders to advertise so as to encourage participation in the games which they offer.170 Advocate General Mazák provided his Opinion on these matters on 23 February 2010. The legislative history of the federal gambling legislation, the Glücksspielgesetz, reveals a pragmatic approach to regulating gambling. Rather than attempting to effectively secure a complete ban it was decided to channel the desire to gamble so as to protect the interests of the individual and wider society.171 However, whilst protecting the player is the overriding objective, it also apparent that a key feature of the regulatory regime is to generate as much taxation revenue as is commensurate with protecting players.172 In contrast to other regulatory regimes, although not the operation of the United Kingdom’s National Lottery which takes a similar conditional approach to revenue generation, the generation of revenue is an explicit objective of the regulatory regime. Certain conditions qualify which undertakings may hold the concessions, which amongst others require an undertaking to be a limited liability company established within Austria.173 A further condition which is liable to restrict free movement is that which forbids a concession holder from establishing subsidiaries outside of Austria.174 States would seek to enter the Austrian market. Aside from the fact that offering gambling services for commercial gain is a criminal offence under Austrian law, a German national Ernst Engelmann, offered various forms of casino gaming without holding any form of authorisation from the Austrian authorities or those of another Member State.175 In the course of criminal proceedings against him, Engelmann argued that Austrian legislation was incompatible with Articles 49 and 56 TFEU. The judge of the national court doubted the compatibility of the Austrian regulations on four grounds; firstly

170 Opinion of Advocate General Mazák in Engelmann, supra note 11, para. 2. 171 Ibid., para. 5. 172 Ibid., para. 6. 173 Ibid., para. 15. 174 Ibid., para. 17. 175 Ibid., para, 22. 58



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that no research existed as to the dangers of gambling addiction nor the possibilities of preventing addiction; secondly question marks hung over the regime as to whether it satisfied the consistent and systematic test given the different regulatory treatment different forms of gambling received; thirdly whether the requirement to be established in Austria was a proportionate restriction to achieve the aims of combating economic criminality, money laundering and gambling addiction; and fourthly doubts arose due to the emphasis Austrian law places upon the generation of revenue, in particular how the requirement that revenue streams cannot be reduced can be squared with restrictions reducing opportunities to play.176 These doubts led the national judge to refer the following three questions to the Court of Justice: 1. Whether the requirement that a concession holder is a limited liability company established in Austria is compatible with Article 49 TFEU. 2. With a view to establishing if the restrictive measure applicable to the casino sector meets the consistent and systematic test should it be assessed in relation solely to this particular sector or the national market as whole; taking in all sectors into this analysis? 3. As the second question pertaining to both Articles 49 and 56 TFEU; whether the 15 year duration of the concession which is closed to undertakings established outwith Austria’s borders is compatible with these freedoms. 3.7.2. Engelmann – the Opinion The response of Advocate General Mazák shall be analysed in sequence with the order the questions were posed. The first question can be divided into two, whether the requirement to be established in Austria is compatible with Article 49 TFEU and whether the specification of a particular legal form is likewise. Having given the impression that a very distinct line can be drawn between the freedoms associated with establishment and services, the Advocate General agrees with the observation of the European Commission that this questions does indeed fall under Article 49 TFEU and not Article 56 TFEU due to the permanent nature of a casino, which requires a commercial presence in the jurisdiction where the service is offered.177 Nevertheless, the fact that this requirement also negates the freedom to provide services is not lost upon the Advocate General, but given that the free movement of services enjoys a lower hierarchical status than that of establish-

176 Ibid., paras. 25–28. 177 Ibid., paras. 44–47. 59

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ment, Article 56 TFEU does not enter into the picture.178 This is somewhat in contrast to earlier cases whereby the two freedoms were considered rather interchangeably.179 Should the Court follow the Advocate General then it will unequivocally find the requirement to be established in Austria as a measure constituting direct discrimination the justification of which is limited to the narrowly interpreted grounds provided in the Treaty, namely 45 & 46 EC.180 Claims by the Austrian authorities that Member States enjoy a margin of discretion to determine what is necessary to protect consumers and public order within their jurisdictions are dismissed when the Advocate General notes that ‘this margin of discretion has its limits however’, limits which exclude measures that discriminate on the basis of where an undertaking is established.181 Therefore the plea that the measure is proportionate since this requirement only arises once an applicant undertaking has secured a concession, and thus does not need to be established in Austria during the application procedure, is squarely rejected given that the discrimination is effective upon the extension of the concession to the incumbent holder.182 In contrast, the requirement that the holder takes the form of a limited liability company is far less contentious in terms of its compatibility with Article 49 TFEU. Given that natural persons within Austria are prevented from holding a concession, this restriction of the freedom of establishment is merely restrictive yet non-discriminatory in its effect upon natural persons outside of Austria.183 Referring to Gambelli this restrictive measure nevertheless has to be justified by overriding reasons in the general interest.184 Therefore it is for the national court to decide whether this form of undertaking is suitable for securing the effective monitoring of this ‘sensitive sector’ which the national authorities seek to achieve and whether this would be impossible if a concessionaire was to take on another legal form. Thus, the Advocate General advises the national court to consider whether minimal capital requirements are a suitable means for obtaining the level of societal protection Austria seeks to achieve in terms of attesting to the probity of a concession holder and the protection of creditors.185

178 Ibid., para. 48. 179 Hatzopoulos, V. & Uyen Do, T., ‘The Case Law of the ECJ Concerning the free Provision of Services: 2000–2005’, Common Market Law Review, 43 (2006), 923–991, p. 952. 180 Opinion of Advocate General Mazák in Engelmann, supra note 11, paras. 51–59. 181 Ibid., para. 61 where the Advocate General states ‘[c]ette marge d’appréciation, réelle, a toutefois ses limites.’ 182 Ibid., para. 62. 183 Ibid., paras. 64–65. 184 Gambelli, supra note 29, para. 65. 185 Opinion of Advocate General Mazák in Engelmann, supra note 11, para. 68. 60



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The second question referred deals with the application of the consistent and systematic test to establish the compatibility of the regulation of this sector with both Articles 49 and 56 TFEU. Once again a dual approach is undertaken by the Advocate General; in terms of the nature of advertising within the Austrian market and whether the test should apply solely to the casino sector or more broadly in relation to the regulation of the entire national gambling market. In responding to the concerns of the national court as to the compatibility of a monopolist system where advertising prevails the Advocate General referred to the objectives of the legislation. If it were to be found that generation of the taxation revenues was a primary objective of the law then the monopoly system, with or without advertising, would be incompatible with Union law.186 However, in the light of Placanica, the advertising of gambling by the monopolist would be compatible so long as it merely informed the public as to the availability of attractive legal gambling opportunities. To do otherwise, namely to excessively stimulate demand, would be inconsistent with the other objective of the legislation, namely consumer protection.187 However, it is unclear as to at which point advertising as a means of informing the public could cross-over to excessive stimulation thereof. Seemingly rebuffing the claim by the Austrian government that a single advertising campaign which was not consistent with the national regulatory regime should not derail the national monopoly, Advocate General Mazák importantly noted that the national court should pay attention to the effectiveness of the supervisory mechanism to which the monopolist is subject.188 Therefore, in determining whether a regulatory regime is consistent and systematic the Advocate General reasserts the position that the practice of the competent national authorities has to be taken into consideration, rather than merely referring to the regulator’s intentions as cast in the black letter of the law. Consideration of the question concerning the sectoral analysis is relatively brief, given that Advocate General Mazák was able to refer to Placanica189 where it was held that the review of consistency should take place on a sector by sector basis. Moreover the Advocate General recognises that different forms of gambling vary in terms of whether they are prone to fraudulent and criminal activities, and

186 Ibid., para. 80. 187 Ibid., paras. 81–83. 188 Ibid., para. 85. 189 Placanica, supra note 33, para., 49 where the Court of Justice held: ‘The restrictive measures imposed by the national legislation should therefore be examined in turn in order to determine in each case in particular whether the measure is suitable for achieving the objective or objectives invoked by the Member State concerned and whether it does not go beyond what is necessary in order to achieve those objectives.’ 61

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their respective potential for gambling addiction. Therefore, Member States are foreclosed from engaging in a collective, global, assessment and as a consequence different gambling sectors, although subject to monopoly based supply, may be regulated in different ways.190 Member States would thus free to differentiate in terms of how much advertising monopolists in different gambling sectors are permitted to engage in without endangering the consistency of each monopoly regime, and the compatibility thereof with Union law, should the Court follow this approach. Finally, attention is turned to the final question, seeking guidance on the compatibility of the 15 year duration of the concessions during which undertakings not established within Austria are excluded from the market with Articles 49 and 56 TFEU. In relation to the length of the concessions, the Advocate General considers that a duration of fifteen years does not give rise to any concerns in terms of compatibility with Union law. Ultimately it is a non-discriminatory, consistent, and proportionate restriction to Articles 49 and 56 TFEU.191 Indeed, he considers that account has to be taken of the necessary investments made in establishing a casino operation; too short and a concession holder would have to engage in aggressive advertising contradicting the regulatory objectives. Nevertheless, Austria conceded that the current concessions had been extended for a total duration of 22 years without prior notice. Advocate General Mazák refers to the general case-law on the obligation of transparency, and in the event that the restriction is indistinctly applicable the extension without prior notice must not go beyond what is necessary to achieve the regulatory objectives.192 Recognising that this restricts the freedom to provide services the Advocate General nevertheless refers the national court back to the part of his Opinion responding to the first preliminary question, and to the extent that this measure is discriminatory it cannot be deemed justifiable. 3.8. Markus Stoß 3.8.1. Markus Stoß – the Issues This Opinion is a response to six separate preliminary references made by two courts, namely the Verwaltungsgericht Gießen and the Verwaltungsgericht Stuttgart, which have been joined and hereinafter are referred to as ‘Markus Stoß’. Along with the reference from the Schleswig-Holsteinische Verwaltungsgericht, in Carmen Media, these cases concern the sanctity of German sports-betting regulation in the midst of pressure from operators regulated in other Member

190 Opinion of Advocate General Mazák in Engelmann, supra note 11, paras. 88–90. 191 Ibid., para. 97. 192 Ibid., paras. 100–102. 62



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States. Advocate General Mengozzi delivered his Opinions for both Markus Stoß and Carmen Media on 4 March 2010, and whilst they have not been joined, a number of parallels prevail between them. The domestic legal scenery is the same as that described in Winner Wetten with the requirements of the two Länder involved, namely Hessen and BadenWürttemberg, complying with the framework established by the Interstate Treaty on Gambling. Authorising the provision of sports-betting (excluding horserace betting), lotto and lotteries falls within the competence of the authorities of Hessen, which are empowered to grant authorisation to private undertakings. However, commercial betting can only occur in betting shops. Baden-Württemberg witnesses the same three forms of gambling,193 being provided by private operators in which the public authorities may have a direct or indirect financial stake.194 In a fashion similar to Winner Wetten the applicants in the six joined cases acted as intermediaries in the provision of sports-betting services for operators licenced in Malta, Gibraltar and the United Kingdom. Responding to attempts of the respective Länder to prevent the intermediaries from providing such services the applicants claimed that federal monopolies on sports-betting were contrary to the freedoms embodied in Articles 49 and 56 TFEU, and that nevertheless, the licences issued to the operators on whose behalf they acted upon, should have been sufficient to allow them to pursue their activities in Germany. The two administrative courts seized of the various cases referred the same two preliminary questions, the latter of which will undoubtedly prove to be of fundamental significance in defining the contours of the free movement principles in this sector, especially when considered in parallel with the second question dealt with in Carmen Media. These two questions arising in Markus Stoß being: 1. Whether Articles 49 and 56 TFEU preclude, following the application of the consistent and systematic test, a monopoly on sports-betting services, when other forms of gambling, which have the same or higher potential for gambling addiction, may be provided for by private operators. 2. Under Articles 49 and 56 TFEU must operators who are licenced in one Member State and where those licences establish a basis for providing services outside of the territory of that Member State be allowed to offer services elsewhere without having to obtain any further authorisation in the receiving Member States?

193 Although from the information provided it is not clear what status betting on horse races enjoys. 194 Opinion of Advocate General Mengozzi in Markus Stoß, supra note 1, paras. 17–18. 63

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3.8.2. Markus Stoß – the Opinion The Advocate General reformulates the first question to exclude the freedom of establishment and to shift the emphasis of the question away from a presumption of incompatibility with Union law to whether given the prevailing circumstances the regulation of sports-betting and lotteries is inconsistent and is therefore incompatible with Union law.195 Attention is primarily focussed on whether the restrictions inherent in the monopoly system are consistent and proportionate with the aims of the regulatory regime, which centres around the Advocate General’s reference to the ‘hypocrisy test’, i.e. whether the restriction is consistent.196 This assessment is of two halves; firstly the nature of the monopolists’ advertising campaigns and secondly the fact that private operators are allowed to provide other forms of gambling than lotteries and sports-betting which entail a greater risk of gambling addiction. These shall be dealt with in turn. Advertising by the public monopolists was allegedly ‘intensive’ according to the applicants,197 yet the Advocate General opined on the extent to which the finding in Placanica that advertising is consistent with combating crime and fraud applies to a regime with the objective of avoiding gambling addiction. Reference was made to the decision of the EFTA Court in Ladbrokes v. Norway198 in which it was held that advertising does have a role to play in this context, to channel demand away from addictive gambling offered by the internet and other forms which are difficult to eradicate from the national market. Within this context Advocate General Mengozzi proposes that the finding of the Court in Placanica is extended to instances where the objective is to combat addiction, but only in so far as a number of conditions are met. These are that the opportunities for gambling are restricted, advertising is moderate in nature and directs play towards regulated and controlled supplies, and that gambling is not used by the state to increase tax revenue. In this the Advocate General expresses a sense of pragmatism since it would be unrealistic to expect monopolies or concession holders not to promote the existence of their services.199 The condition that the state does not use gambling to increase tax revenue is somewhat difficult to qualify given that all gambling generated tax revenue represents an increase in revenue compared to a situation where no gambling was permitted, or was not directly taxed. Or, does it entail that all the revenues should go to good causes, and not to the state? Surely if this is the case, such causes would have to be those

195 Ibid., paras. 36–41. 196 Ibid., para. 5. 197 Ibid., para. 53 198 E-3/06, Ladbrokes Ltd. v. Norway, decision of 30 May 2007. 199 Opinion of Advocate General Mengozzi in Markus Stoß, supra note 1, para. 61. 64



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that the state would not otherwise have funded, because otherwise the gambling generated revenue would ease the burden on other sources of tax revenue, thus representing an indirect benefit to a state’s coffers. In line with Advocate General Mazák in Engelmann Advocate General Mengozzi found that compatibility of the monopoly model should only be assessed in relation to the sectors in question and not on the basis of a broader assessment taking in the entire national gambling market. Therefore, the fact that private operators prevailed in other sectors of the German gambling market could not be used to support the claim that the exclusion of such operators from the lottery and sports-betting markets was inconsistent and thus incompatible with Union law. Recalling Schindler, as the Advocate General does, this conclusion should not cause shockwaves since the Court distinguished the regulation of large-scale lotteries from the regulation of widespread commercial gambling opportunities.200 Thus from the more embryonic stages of the evolution of this case-law, national authorities have been able to distinguish sectors in terms of the regulatory treatment they receive. Indeed, we are reminded that the Court has never pursued an all or nothing approach in relation to liberalisation, but rather that a sector by sector approach is more appropriate. Therefore, legislators should be free to determine if certain forms of gambling should be supplied pursuant to a monopolist whilst private operators can supply other forms, without undermining the consistency of restrictive measures. Yet should those measures be designed to limit opportunities to play then the supply of gambling services in a monopolist regime should be less than they would be under a market with a private operator.201 As a diversion, it is interesting that reference is made in the singular to private operator; the quantity of gambling offered under a monopoly must be less than it would otherwise be with a private operator. Evidently it goes without saying that where there is only one private operator a monopoly also prevails. This would have more readily digestible had reference been made by ‘private operators’ in comparison to a monopolist; where the monopolist could have been a private undertaking or a public undertaking. Arguably the focus of such a discussion would have shifted to whether the private monopolist should be subject to a limitation on the quantity of gambling supplied or whether this would only apply to public operators in the truer sense. Furthermore, the potential for addiction is not the sole criteria for assessing the dangers of gambling suggests the Advocate General, while noting that those forms which are most liable to lead to addiction may not reflect those sectors in which it is most difficult to achieve success in combating crime. Therefore the Advocate General guards against the execution of a comparative policy analysis between different forms of gambling with comparable levels of potential for 200 Ibid., para. 70. 201 Ibid., para. 74. 65

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gambling addiction. Instead, the compatibility of a monopoly with Article 56 TFEU should be determined in light of its suitability and consistency with the objective pursued.202 Given that different forms of gambling will vary in their propensity to give rise to negative consequences, it is readily acceptable that the consistency of a restrictive measure should only be assessed in relation to the specific sector in question, and not against the backdrop of the entire national market. Therefore, the notion that forms of gambling with comparable addiction potential should also be assessed separately seems slightly at odds with this; yet this likely to be a product of the per sector nature of the analysis conducted and the fact that other dangers frequently come into play since it may not be possible to isolate addiction from other harmful consequences. Three additional factors were advanced by the applicants in their attempt to persuade the Court that the German system is incompatible with Union law, yet the Advocate General rejected both. Responding to the claim that the gambling offered on the internet made it easy to navigate around the state monopolies Advocate General Mengozzi endorsed the French position that the problems national authorities face in enforcing national law does not determine whether restrictive measures are compatible with Union law.203 Arguably such enforcement should be distinguished from that which is exercised over legal providers within the market; key to the consistency and thus proportionality of national measures is, as has been strongly suggested by Advocate General Mengozzi, that practice correlates with the objectives underpinning restrictive measures. Thus, this is a different issue of enforcement and enforceability than keeping the national system protected from operators based outside the castle walls. Secondly, it would appear that it is not a condition sine qua non for a restrictive measure to be supported by (statistical) evidence.204 The applicants claimed that the monopolies were not buttressed with the benefit of research into gambling addiction. Reference was made to the call for evidence in Lindman205 which the 202 Ibid., paras. 75–76. 203 Opinion of Advocate General Mengozzi in Markus Stoß, supra note 1, paras. 78–79. 204 Ibid., para. 83. 205 Case C-42/02, Lindman, [2003] ECR I-13519, where the Court held in paras. 25–26: ‘In that regard, the reasons which may be invoked by a Member State by way of justification must be accompanied by an analysis of the appropriateness and proportionality of the restrictive measure adopted by that State (see, to that effect, Case C-55/94 Gebhard [1995] ECR I-4165, and Case C-100/01 Oteiza Olazabal [2002] ECR I-10981). In the main proceedings, the file transmitted to the Court by the referring court discloses no statistical or other evidence which enables any conclusion as to the gravity of the risks connected to playing games of chance or, a fortiori, the existence of a particular causal relationship between such risks and participation by nationals of the Member State concerned in lotteries organised in other Member States.’ 66



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Advocate General interpreted as being only for the purposes of proving the consistency of the measure in question but could not be construed as a basis for requiring authorities to engage in statistical research.206 In considering that this cannot be an absolute requirement support was found for the Commission’s position that the fact that the compatibility of a measure with EU law has not previously been considered cannot entail that it is impossible that that measure can be found to be compatible.207 Really this is an exercise in common sense, if a measure has not been questioned before in terms of its compatibility with Union law how can national authorities be expected to role out a research programme to show that the measure is compatible? Yet on the other hand, question marks have hovered over gambling regulations for sometime now so such questions and finger pointing towards a lack of evidence cannot be considered as wholly unexpected. Thirdly the argument that other Länder, i.e. other sub-national authorities of the same Member State, permit exceptions to the monopoly model in this sector received short shrift from the Advocate General. Although recognising the serious challenge such exceptions pose to the consistency of the system, it is for the national judge to determine whether the presence of private operators in the sectors in question smear the entire national approach with being found as incompatible with Union law.208 The second preliminary question is dealt with relatively briefly but deserves detailed attention. The issue at stake is readily pinpointed by the Advocate General, namely; whether the principle of mutual recognition applies to sports-betting services provided pursuant to a licence which does not restrict the provision of such services to the territory which granted the licence.209 When responding to the national court in Carmen Media this analysis is refined so as to concentrate upon the application of mutual recognition to situations where the licensing authority does not permit the authorised services to be provided within its own territory. Upon the basis of three strands the Advocate General explains why the principle of mutual recognition does not apply in this context. Firstly, given the ‘unequivocal case-law concerning monopolies and other restrictions’210 to Article 56 TFEU the Advocate General notes that there is no scope for an EU-wide uniform application of mutual recognition in gambling services as this would render the existing case-law meaningless in terms of permitting

206 Opinion of Advocate General Mengozzi in Markus Stoß, supra note 1, para. 82. 207 Ibid., para. 83. 208 Ibid., paras. 84–85. 209 Ibid., paras. 90–91. 210 Ibid., para. 92. 67

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Member States to maintain monopolies.211 One should not be overly surprised by this because to determine otherwise would fundamentally undermine the discretion which Member States have been accorded by the Court of Justice to regulate gambling so as to respond to the associated dangers in a manner they best see fit in relation to nature of their societies. Indeed, explicit reference is made to Säger in which it was held that the public interest which is being safeguarded may form the basis of a restrictive measure to the extent that it is not protected in the Member State where the supplier is established.212 Furthermore, in as far as the monopoly is compatible with the principles of free movement, the fact that another Member State has opted for a more open market approach in securing the same objective cannot be used to undermine the existence of an EU-proof monopoly. In this respect the earlier case of Läärä is being reaffirmed by the Advocate General. Thus, mutual recognition would be incompatible with existing European case-law on gambling. Theoretically speaking the Advocate General then considers that it would only be possible for such recognition to occur between Member States which apply comparable licensing conditions pursuing the same objectives.213 The lack of harmonisation is then provided as a reason for not giving effect to mutual recognition in this field. This marks a considerable contrast to early case-law of the Court of Justice whereby, in establishing the notion of mutual recognition, this concept was seen as a means to further market integration in the face of a lack of harmonisation.214 Implications arising from the lack of harmonisation receive attention in the second strand of the Advocate General’s response. Having detailed the exclusion of gambling from the Services Directive it is correctly noted that this does not enlarge the margin of discretion enjoyed by Member States.215 Yet this is countered by the lack of grounds for mutual recognition to become operative, even though it is frequently seen as a panacea to integrate national markets, this principle, like the margin of appreciation, has it limits.216 Astutely the consequence is noted in terms of free movement that will consequently be limited, and that the

211 Ibid., para. 94. 212 Säger, supra note 42, para. 15. 213 Otherwise, pressure would build for deregulation in the form of a regulatory ‘race to the bottom’ as noted in by the Advocate General in his reference to Littler, A., Regulatory perspectives on the future of interactive gambling in the internal market’. See also section 2.2 on mutual recognition. 214 See section 2.2. on mutual recognition, in particular the case-law of the Court from Cassis de Dijon onwards. 215 Opinion of Advocate General Mengozzi in Markus Stoß, supra note 1, para. 99. 216 Ibid., para. 100. 68



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compatibility of these limitations will be determined by judicial authorities.217 Significantly the Advocate General appreciates the potential importance of the Services Directive, in recognising that the provisions contained therein establishing a system of administrative cooperation between national authorities are lacking in the gambling sector and that to the contrary certain practices actually conflict with mutual trust.218 If mutual trust, is at the heart of a system of mutual recognition, then perhaps a system of administrative cooperation in the gambling sector could further such trust, in as far as the position of EU proof monopolies is not undermined. The third strand is indicative of regulatory practices which the Advocate General considers will undermine mutual trust in this instance, namely licences which only permit the provision of gambling services in jurisdictions other than in those awarding the licence.219 Poignantly such licences are described as a ‘violation of mutual trust’.220 Could this therefore point towards a future in which the recognition of mutual equivalence, conditioned by administrative cooperation between national authorities would be possible, except for the provision of services into markets where a monopoly provider rules the roost and otherwise excluding services provided on the back of ‘export only’ or ‘offshore licences’?221 Further research is needed to move this particular debate along, as well as to elucidate whether other practices prevail which serve to undermine mutual trust in the sector. One could well imagine that disregard for the notion of transparency could fall within this category. 3.9. Carmen Media 3.9.1. Carmen Media – the Issues The preliminary questions in Carmen Media arose following a request from this operator, which is licensed in Gibraltar for the purposes of providing ‘remote gambling/fixed-odds bets for offshore bookmaking’, to offer its sports-betting services to residents of the Land Schleswig-Holstein on the grounds of this licence. Failing that, the operator sought a licence from this sub-national jurisdiction. Following the rejection of this request Carmen Media appealed to the Schleswig-Holsteinische Verwaltungsgericht claiming that the public monopoly

217 Ibid., para. 101. 218 Ibid., paras. 101–102. 219 This will be dealt with below in Carmen Media. 220 Opinion of Advocate General Mengozzi in Markus Stoß, supra note 1, para. 104. 221 Reflected upon in Hörnle, supra note 74, p. 33. 69

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for sports-betting services is incompatible with Article 56 TFEU.222 Once again the domestic legal scenery is that which was described in Winner Wetten, however, much is rightly made of the legal regime of Gibraltar which only permitted Carmen Media to export its gambling services, upon the back of the freedom to provide services, to residents of the Union yet not those of Gibraltar. This proves to be of pivotal importance in the Advocate General’s analysis. Within this context, four preliminary questions were referred by the national court, all of which were deemed admissible by Advocate General Mengozzi. These questions are: 1. For Article 56 TFEU to apply must the operator be able to supply the service within the Member State where it is established? 2. Does Article 56 TFEU preclude public monopolies from the provision of sports-betting and lottery services for which the prevention of gambling addiction is the primary aim when other more addictive forms of gambling are provided by private operators within the particular sub-national territory? Should this question be answered, then three and four require consideration. 3. Whether Article 56 TFEU precludes the authorising body from enjoying discretion to set conditions attached to the authorisation, even when the operator satisfies the criteria to qualify for the licence as established in law? 4. In the context of a transitional period whether Article 56 TFEU precludes, against the backdrop of public monopolies for sports-betting and lotteries designed to combat gambling addiction, private operators from offering more addictive forms of gambling. 3.9.2. Carmen Media – the Opinion The first preliminary question closely correlates with the last question of Markus Stoß; the manner in which Member States should approach licences which are granted by jurisdictions which do not permit the provision of the licensed service within their territory. Carmen Media offered sports-betting pursuant to an ‘extraterritorial licence’ granted by Gibraltar which prohibited it from offering the licenced services to residents of this territory. According to the operator this was not to protect Gibraltarians from the dangers of gambling but arose as a consequence of the requirements of tax law.223 As the Advocate General discusses an export only licence is the antithesis of mutual recognition; Germany

222 Opinion of Advocate General Mengozzi in Carmen Media, supra note 10, paras. 21–23. 223 Opinion of Advocate General Mengozzi in Carmen Media, supra note 10, para. 31. 70



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need not recognise the licence from where Carmen Media is established because the licence does not permit this operator to offer its services in the jurisdiction where it is established. Given the connection between mutual recognition and the avoidance of double regulatory burdens, as given in Webb, mutual recognition will be inoperable in the case of export only regimes. According to Advocate General Mengozzi, mutual recognition is only possible when the Member State from which the service originates conducts checks which are comparable to those exercised by the authorities where the service is received.224 Indeed, the whole premise of free movement founded upon Article 56 TFEU requires a degree of comparability in these checks on operators, following on once again from Säger, which determined that non-discriminatory restrictions are incompatible with the Treaty in instances where they are ‘liable to prohibit or otherwise impede the activities of a provider of services established in another Member State where he lawfully provides similar services.’225 In this particular case operators holding a Gibraltarian licence are unable to provide similar services in their place of establishment. Ultimately the claim by Carmen Media that it was prohibited from serving the domestic market due to the tax regime was rejected by the Advocate General for the undertaking had voluntary decided to establish itself within this jurisdiction and therefore should be ready to accept the consequences associated with the licence it acquired.226 The Advocate General proceeds to ask ‘[w]hy should Member States be obliged to accept a licence which is not valid for those who granted it?’227 Trust between Member States which is a prerequisite for mutual recognition is thus undermined by such licences; since the service cannot be provided in Gibraltar it is reasonable in the eyes of the Advocate General to expect that there are no conditions and controls in the place of establishment which would render intervention by Germany unnecessary.228 Whilst rejecting the suggestion that reliance on this regulatory model constitutes an abuse of the internal market, it nevertheless illustrates once again why absolute mutual recognition is not appropriate within the gambling market. This perfectly illustrates how mutual recognition has no role to play at the ‘extremes’ of providing gambling services. Firstly should a legitimate EU-proof monopoly prevail than mutual recognition would by its very nature undermine this regulatory approach whilst concurrently this principle cannot form a basis for securing access to other markets when the home market is closed off. To 224 Ibid., para. 36. 225 Säger, supra note 42, para. 12. 226 Opinion of Advocate General Mengozzi in Carmen Media, supra note 10, para. 43. 227 Author’s own translation of ‘Pourquoi les États membres devraient-ils accepter une autorisation qui n’est pas valable pour ceux qui l’ont délivrée?’, ibid., para. 44 228 Ibid., para. 45. 71

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conclude otherwise would once again have an undermining effect; this time of the principle itself, since there would be an absence of legislation, supervision and enforcement for the receiving Member State to recognise.229 The second question concerns whether the consistency assessment is made on a sectoral basis or in relation to the national market as a whole. Given that this was answered by the Advocate General in Markus Stoß attention is directed to the sole difference between these two cases; namely that the latter raises the issue of the consequences deriving from the division of legislative power within a Member State, which arises in this instance between the Länder and the federal state. Recalling case-law to the effect that the internal constitutional division of competences within a Member State cannot justify non-compliance with Union law, the Advocate General considers that the division of powers for the purposes of gambling regulation cannot offer a safe haven for measures which may be in conflict with Treaty freedoms. Moreover, although the division which prevails in Germany should not be seen as undermining the consistency of restrictive measures at the national level, equally the division should not provide a cover for inconsistencies or discriminatory measures.230 Less concerned with gambling regulation and more relevant for discussions framed in terms of discretion accorded to national authorities granting market access is the issue central to the third preliminary question. In other words, to what extent can an administrative body exercise discretion when an operator satisfies the conditions established in law?231 Existing case-law is described as not permitting discretion on the part of the authorising body so as to make the exercise of free movement illusory and refers to the characteristics which a licence award procedure must abide by so as to avoid such illusions.232 Indeed, there are boundaries to the exercise of discretion by national authorities so as to prevent misuse of such powers but as long as the authorisation procedure is objective, transparent and non-discriminatory such authorities should be able to exercise a degree of discretion to ensure that they are able to come to a decision which is most appropriate in every particular instance.233 The final question concerns the complete ban on internet gambling introduced in 2008 with the transitional period of a year during which operators that were legally supplying internet gambling services were able to leave the market in a timely fashion yet concurrently benefitting from a degree of legal certainty. 229 However, the question remains to be answered how recognition could be conditioned and applicable to sectors where monopolies such as that in Santa Casa and export only licences to do not prevail. 230 Opinion of Advocate General Mengozzi in Carmen Media, supra note 10, paras. 56–59. 231 Ibid., para. 60. 232 Ibid., paras. 63–64. 233 Ibid., paras. 65–66. 72



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Advocate General Mengozzi centres the focus of his inquiry into the implications of the principle of legal certainty rather than the ban itself. Nevertheless he still raises the issue of proportionality and whether a less restrictive measure could exist. Potentially of considerable significance however is the observation that a prohibition of internet gambling would conflict with the simultaneous provision of that form of gambling by an offline monopoly in terms of the need for demand to be channelled.234 Although deference is made to the national court on this point, is it beyond the realms of conceivability for the lack of an online form of gambling which an offline monopolist can offer in the Member State to undermine the consistency of the ban, where there is clear demand for the particular form of internet-based gambling in question? Given the strict regulatory conditions which applied to those operators for whom the transitional period was designed to provide legal certainty, the Advocate General strongly suggested that this period was compatible with Article 56 TFEU. Indeed he noted how the period would facilitate the change to a new legal order in respect to internet gambling in Germany.235 Whilst of limited importance in terms of defining the scope of the margin of discretion which Member States enjoy, should the Court of Justice agree with the position taken on this point then guidance and room will be given to national authorities for as and when they decide to amend their regulatory regimes and thus give effect to new or different restrictive measures.

4. Concluding Remarks Following the decisive stance taken by the Court in Santa Casa subsequent preliminary references will continue to define the extent to which national authorities have to take the regulatory efforts of other Member States into account. Indeed, it may be so, following Carmen Media that services supplied from export only regimes will receive the treatment foreseen in Santa Casa. However, the applicable facts are not replicated across the internal market and this approach will need to be refined and defined in relation to cases where market access is granted to multiple operators. Furthermore, not all exclusive rights holders are comparable in their nature to Santa Casa, thus Betfair will further clarify whether such regimes are also ipso facto able to hermetically seal themselves off from other jurisdictions. In parallel to Betfair, Ladbrokes represents the enforcement of national regulatory preferences and the limitations inherent in an injunction based approach. The reflections by Advocate General Mázak as to the desirability of administrative cooperation in Markus Stoß may hold the key to the future in as far as monopolies

234 Ibid., para. 70. 235 Opinion of Advocate General Mengozzi in Carmen Media, supra note 10, paras. 71–80. 73

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comparable to Santa Casa do not prevail and allow for an appropriate balance between the national regulatory margin of discretion and the supremacy of the fundamental freedoms to be achieved through a conditional approach to mutual recognition.

74

The Perspective of the Swedish Presidency on the Issue of Gambling Ellen Heldahl

This contribution is based upon the Progress Report of the Swedish Presidency of the Council of the European Union. Sweden held the Presidency from July to December 2009 and the conference was fortunate enough to be given a number of insights into the thinking of the Council Working Party on Establishment and Services, courtesy of Ellen Heldahl of the Swedish Ministry of Finance. This Report builds upon the work begun in the context of the French Presidency of the Council which concluded its term in December 2008 (see Appendix 3). Relative to developments within the European Commission, the European Parliament and the European Court of Justice the consideration of gambling and the regulation thereof within this particular institution is a recent occurrence. Nevertheless, it can only be hoped that discussions at the Council level will provide some valuable input into the wider debate from the perspective of the Member States without being restricted to the confines of preliminary reference and infringement proceedings which arise in their respective judicial contexts. Indeed, possible issues which national governments may discuss are highlighted in the contribution by Etienne Marique, the President of the Belgian Gaming Commission, whilst his Member State holds the European Presidency during the second half of 2010.

Littler et al. (eds.), In the Shadow of Luxembourg, 75–85 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

COUNCIL OF THE EUROPEAN UNION

Brussels, 25 November 2009 16571/09 MI 446 ECOFIN 835 EF 179 ETS 7 JUR 503 COMPET 495

NOTE from: to: Subject:

Presidency Council (Competitiveness) Legal framework for gambling and betting in the Member States of the European Union Presidency Progress Report

In view of the meeting of the Council (Competitiveness) on 3–4 December 2009, agenda item 14 ‘Any other business’, delegations will find in Annex the Progress Report by the Swedish Presidency.

Introduction 1. The Swedish Presidency has taken the initiative to discuss certain topics on betting and gambling in the EU at the level of the Council Working Party on Establishment and Services. The work was carried out following the mandate from the Permanent Representatives Committee from 2 July 2008 to engage in discussions which then had started under French Presidency in the second half of 2008. In particular, the French Presidency Progress Report sent to the Council in December 20081 concluded – inter alia – that an exchange of views on different issues concerning the national legal framework for the betting and gambling sector would be useful. The Presidency also took into account the resolution of the European Parliament adopted on 10 March 2009.2 1 Doc. 16022/08 + COR1 2 The resolution followed the Schaldemose report. See European Parliament resolution of 10 March 2009 on the integrity of online gambling (2008/2215(INI)); P6-2009-0097. 76



The Perspective of the Swedish Presidency on the Issue of Gambling

2. This report follows the structure of the discussions at WP party level under the Swedish Presidency, where the following three topics have received particular attention: – The socio-economical problems of gambling

– Gambling responsibility measures



– National measures regarding the ban of promotion and abetting of crimes related to gambling and betting.

3. The Presidency does not intend to give a full account of all the contributions and different opinions on these topics which have been expressed during the discussions. This Presidency progress report rather tries to summarise some main points being fully aware of the fact that not all issues mentioned or examples given apply to all Member States in the same way. As it has been stated before, different national models of regulation – developed in compliance with Community law – should be respected according to the principle of subsidiarity.3 This summary could nevertheless be a valuable input to further discussions about measures and future policies at Member States level with a view to improving consumer protection in general and the protection of the most vulnerable groups in particular, combating fraud and promoting fair competition whilst fully respecting Member States’ competencies in this area.

The Socio-Economical Problems Related to Gambling 4. Gambling exists as a form of entertainment and should be a pleasure, but for some people gambling leads to problems and perhaps even addiction. The Swedish Presidency believes that problem gambling causes a great deal of suffering for the gambler and his or her family and also entails costs for the society. 5. Although problem gambling is linked to may different problem areas, the costs can be categorised as follows: – The costs of depression related to problem gambling, including direct and indirect costs, i.e. care, medication and loss of output resulting from time off work, early retirement and suicide. As public health could be directly and indirectly affected by gambling in general and problem gambling in particular, more research is needed on such a possibility and its direct and indirect costs.

– The costs of loss of output through unemployment.

3 French Presidency progress report, 16022/08 + COR 1, point 16. 77

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– The costs of treatment for problem gambling both for the individual and supporting projects focusing on treatment of problem gambling



– The costs of crime resulting from problem gambling including the costs for court and police authorities.



– The costs for state efforts targeted specifically at problem gambling.

6. Research has shown that biological, social or psychosocial factors affecting the individual play an important role for the development of problematic gambling behaviour. This notwithstanding, it is possible to identify other risk factors which are probably more accessible to prevention measures: – Accessibility of gambling – Countries with many opportunities to gamble have a higher proportion of compulsive gamblers. In areas with a high concentration of gaming machines people gamble significantly more.

– The effect of alcohol – There are solid indications that alcohol consumption has a direct effect on gambling and problem gambling. The effect of alcohol is especially marked on people who have already developed a gambling problem.



– Reaction to losses and to occasional financial gains – Just having experienced a loss, or having been near to losing, is believed to trigger continued gambling with bigger stakes since the gambler is motivated to recover the loss. Near misses are losses where the gambler regards himself as having been close to winning. This has been shown to have the effect of increasing gambling. Many games are designed in such a way that the proportion of near misses is higher that would arise randomly, as an incentive to further gambling. Occasional financial gain is a major factor behind gambling. One factor in the significance of money is how any winnings are received. If a gambler receives his winning rapidly (for example in net poker or at gaming machines) then problem gambling is more prevalent.



– Tension, excitement and mood – It is reasonable to assume that games with higher stakes provide more tension and therefore increase the risk of problem gambling. Difficult personal circumstances are a key factor in the development of problem gambling. The tension and excitement that gambling provides temporarily relieve anxiety. In some cases gambling is regularly indulged in by people who are suffering from depression and anxiety.



– Characteristics of gambling machines and cost of response – Research has shown that gambling behaviour increases in frequency more rapidly when it takes place on electronic machines which allow a quick and repetitive response pattern. Slower gaming machines and delayed stakes reduce the pleasure of playing. However, the number of turns played apparently

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diminishes if the gambler is informed automatically on the time spent playing and his losses and wins; compulsory pauses in play also have this effect. It may be assumed that playing increases when a stop button gives an illusory impression that one is able to affect the outcome. If gambling only requires a little effort from the gambler, gambling behaviour tends to develop. Factors such as free transport to gambling halls and the possibility of small stakes reduce the effort for the player and increase the likelihood that problematic gambling behaviour will be initiated.

– Advertising – Some studies suggest that advertising makes gamblers develop their gambling.



– Social reasons and environment – Studies shows that social factors such as interaction with other gamblers are significant for gambling. Growing up with family members who have a gambling problem increases the risk of having a gambling problem oneself. Those who start gambling at an early age are also more likely to become problem gamblers.



– Ideas of luck and control – There is link between ideas about luck and compulsive gambling. Investigations have shown that gamblers who have been near to losing but have survived have a tendency to increase their gambling. They regard themselves as lucky and increase their stakes for the next round. People also have the idea that the likelihood of winning increases if you have lost several times in a row. This is despite the fact that the events are completely independent of one another. To justify earlier investments, or so that they do not see their investments as thrown away, gamblers may stick with dysfunctional strategies. Continuing to stake money so as to win back losses is a central behaviour in compulsive gambling.

Gaming Responsibility Measures 7. Responsible gambling measures are efforts made by the regulators and the gaming operators themselves with the aim to ensuring responsible gambling, i.e. efforts to prevent gamblers from developing a gambling problem. Responsible gambling measures may be of various types. The measures may either be stipulated in national law so that they are compulsory for regulated gaming operators, or they may be measures which the gaming operators themselves take to prevent problem gambling arising. Responsibility measures may either be compulsory for gamblers or voluntary, in the latter case the gambler may choose whether to make use of the service or not. In recent years gambling has in many member states become increasingly accessible through the development of the gambling market on the Internet. This is why a number of examples of 79

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gaming responsibility measures focus on Internet gambling, while others are relevant for both offline and online gambling. 8. On the basis of a questionnaire drawn up by the Swedish Presidency and the contributions received from Member States the discussions at Working Party level dealt with a large number of ‘gaming responsibility measures’. 9. The Swedish Presidency furthermore believes that in this context it would be of great value to engage in the work on this topic all relevant services of the European Commission to address gambling responsibility in all its aspects. 10. To sum up the debate, the Swedish Presidency holds the view that the measures set out below (points 10 a)-l)) merit particular attention and consideration at least as a list of examples from which – at Member State level – regulators or gaming operators can draw inspiration. a. The enforcement of age limits can be a valid tool of gaming responsibility. Frequently, there are age-limits on retailer products for example, slot machines or Bingo, on Internet games and on casinos. Regulators and the gaming operators themselves consider how enforcement of the limits are checked and what sanctions or penalties apply to those operators found to be in breach. A licence holder providing gaming services in a gaming machine hall should check the identity of the persons entering the gaming machine hall. Each licence holder providing gaming services in bingo machine halls, bookmaking and totalisator points, before sale of bingo, bookmaking or totalisator cards, should check the identity of the possible client. Each licence holder should have the right to check the identity of the persons entering and/or who have entered the gaming premises, intending to acquire bingo, bookmaking or totalisator cards. Licence holders should have the right to require unauthorised persons to leave the premises.

b. Where online gambling is permitted, online registration could be optimised as a gaming responsibility measure. Detail registration for online gambling should include the notification of personal details such as name, address and birth date. In some Member States this is done with automatic plausibility checks (e.g. checks against the official registration). A banking account to which all profits are transferred and that can only be used once for online-gambling seems adequate. Via these measures circumventions of the registration requirements and of budget limits could be restrained and money flows would stay more transparent (money laundering prevention).



c. In many Member States gambling and betting on credit is not permitted. As an enforcement measure, gaming operators might consider whether to prevent gambling on credit for example by regularly monitoring transactions, in order to further supplement socially responsible measures for particularly

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vulnerable players. Major variations in sales or other indications could also be checked and followed up, and if the operator finds evidence of gaming on credit, the retailer should consider the most appropriate response, which could include suspending the player’s account or providing information about responsible gambling and where to get help on problem gambling.

d. Gaming operators should aim to promote healthy gaming environments, whether that is online or offline. It might be appropriate for restaurants, where gambling is permitted, to maintain a reasonable balance between their slot machines revenue and their total revenue to ensure gaming does not become overly dominant in the restaurant environment. If alcohol is being served in the premises the retailer is responsible to maintain a sober and decorous environment. Regulators and legislators should consider whether to allow gambling only in certain premises. A healthy environment is the one, whereby regulation, control and supervision of the gambling activities may be easily carried out.



e. Gambling machines are a relatively high-risk form of gambling, like most forms of short-odds gambling. Special provisions for gambling machines are therefore widespread. Research indicates a link between the prevalence of addiction and the age at which a player starts playing on gambling machines. As a result, protecting minors is a key priority, as is shown by the following policies implemented by some Member States:



– Gambling machines have been banned from low-threshold establishments (cafeteria’s, take-away restaurants, sports clubs, and similar). Site permits for gambling machines are only given for high-threshold establishments (pubs, bars and restaurants), arcade amusement centres and casinos.



– A system of obligatory age checks has been established for arcade amusement centres. An obligatory identity check has been in place for casinos. Some gambling halls and local authorities use higher age limits on a voluntary basis than those applying for gambling in general.



– The technical regulation of gambling machines is extensive and for instance contains limits on maximum bet and maximum win per game, maximum average win/loss per hour, and maximum peak win/ loss per hour, and measures such as obligatory pauses and warnings.



f. Gaming operators should generally be expected to provide information to all customers about responsible gambling as well as ways to seek help for problem gambling. This could be achieved in part by displaying any relevant contact information for support, such as telephone helpline numbers in all facilities and places where gambling is available and in other areas 81

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

separate from the main gaming area or at lottery tickets. The support number should be displayed ubiquitously in a language understandable for the player.

g. Gaming operators should consider registration cards that could, for example, be used for slot machines, Internet, or casino games to reinforce the current system of age identification and enable new tools and measures to be applied to monitor gambling activity and identify players most at risk. New tools for gambling responsibility measures from the retailers could be introduced to the customers via the registration card. The licence holder and a person willing to participate in gaming will have to conclude a gaming participation agreement. The licence holder, before concluding such an agreement, will have to check whether a person meets all the requirements established by the Law and whether he is not prohibited from gaming. The licence holder, after detection that a person is prohibited from gaming, will not be able to conclude the gaming participation agreement. A person who signed the gaming participation agreement will be attributed a code and/or a password by the licence holder. A person will not be able to conclude the gaming participation agreement through his agent. A person who will enter into the gaming participation agreement will bear responsibility for non-using by other persons the code and/or password attributed to him. A person participating in gaming will be able to stake only the wagered sum of a certain value within a month. The licence holder will have to take gaming pauses.

h. Gaming operators should offer consumers measures/features to enable players to monitor and control their own gambling. For example, operators may wish to consider enabling players to take a ‘self-test’. The purpose of the self-test is that players can see if they are in the risk zone and give themselves a chance to change their behaviour before they have a problem. If designed correctly a test could signal a problem early on and is therefore an effective tool in preventing unhealthy gaming habits from developing.

i. Individual players might determine how much is appropriate for their purposes. When setting a poker budget, for example, the player can enter the amount of time as well as money he or she wishes to spend. The selection of time and financial budgets can be made on a daily, weekly and monthly basis. When players are near to their limit they are informed and when they reach their limits the game is automatically stopped.



– Reduction of the upper limit of stakes. There should be a general restriction of an overall maximum online stake per player and period



– The player should have the possibility to fix a lower period budget- limit for online-gambling.

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– The player’s budget should be a general budget limit, not confined to certain games.



– A raise of the chosen budget should only be made after a cool-downphase



– The player should have the possibility to fix a daily time-limit for online-gambling.



j. Gaming operators should be expected to offer to all players an option to self-exclude from gambling. Players who play on Internet, Slot-machines or Casinos can close their gaming account whenever they wish, and can either choose to no longer take part in games or conduct transactions to or from their ‘registration card’ or to limit their number of visits. The gaming operator should offer self-exclusion or limited visits to all their players.



k. Certain practices could possibly be prohibited:



– applying fixed discounts for owners of coupons distributed in mass media or in other ways;



– providing gaming services free of charge or by deferring payments.



– granting a right to the player immediately or within certain period of time after the gaming to get award or premium to gaming services;



– proposing gaming services to persons by indicating a supposed decrease in price of gaming services and/or an allegedly large prize, also by other means or measures inconsistent with good morality and public order;



– providing gaming services as prizes of lotteries, contests, sport games, games or for participation in other events, or in addition to them;



– organising games or contests, lotteries and other events in non-gaming places which would encourage to use gaming services;



– giving (gratuitously) or to sell for a symbolic price alcoholic beverages or other products, with an exception of representative items of licence holders with gaming activity permits, to players.



l. Guidelines for marketing and socially responsible advertising could be developed such as:



– Advertising for gaming operators should comply with legislation, and shall be developed in such a way that it is not perceived as offensive or aggressive.

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– Advertising should not take advantage of consumer confidence in the gaming industry and its participants, or mislead consumers, for example regarding the chances of winning.



– Advertising should not claim that the results of a game of chance are influenced by anything other than chance.



– Advertising should not be selectively targeted towards vulnerable or particularly marginalised groups in society.



– Advertising should not be used in a context that primarily attracts minors or be designed to target this group.



– Persons under 18 should not play a central role in advertising other than as recipients of the gaming operator’s contributions, or when games are not directly marketed. The underage gaming prohibition should be advertised.



– Advertising should not encourage consumers to engage in excessive gaming and shall promote a responsible gaming behaviour.



– Advertising should not claim there are no risks associated with excessive gaming.

Different National Legislations 11. On the basis of a questionnaire drawn up by the Swedish Presidency concerning the ‘ban of promotion and abetting of crimes related to gambling and betting’, the written contributions received by Member States and the discussion at Working Party level have revealed an interesting picture of several features common to many Member States. Instead of presenting a catalogue of measures in this field of Member State competency, the Swedish Presidency considers the following messages as essential: 12. As stated in the rulings of the European Court of Justice, the legislation on games of chance is one of the areas in which there are significant moral, religious and cultural differences between the Member States. In the absence of Community harmonisation in the field, the Presidency believes that it is for each Member State to determine in those areas, in accordance with its own scale of values, what is required in order to ensure that the interests in questions are protected. 13. The Member States are therefore free to set the objectives of their policy on betting and gambling and, where appropriate, to define in detail the level of protection sought. However, the restrictive measures that they impose must

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satisfy the conditions laid down in the Treaty and in the case-law of the European Court of Justice. 14. In a recent ruling4 the European Court of Justice has also stated that a Member State ‘is entitled to take the view that the mere fact that an operator (…) lawfully offers services in that gambling sector via the Internet in another Member State, in which it is established and where it is principle already subject to statutory conditions and controls on the part of the competent authorities in that State, cannot be regarded as amounting to a sufficient assurance that national consumers will be protected against the risk of fraud and crime, in the light of the difficulties liable to be encountered in such a context by the authorities of the Member State of establishment in assessing the professional qualities and integrity of operators.’ In this context the Presidency believes that the Member States have an interest and right to regulate and control their gambling markets in accordance with their traditions and cultures in order to protect consumers against e.g. addiction, fraud, money-laundering and match fixing in sports. Criminal sanctions, bans of promotion or for example IP-blockings will continue to work according to Member States’ own provisions and legal priorities.

Conclusion 15. The Swedish Presidency encourages all relevant parties, including the preparatory bodies of the Council, to continue work and the exchanges of experience on the ‘Legal framework for Betting and Gambling’. In doing so, a deeper understanding of common features and differences at Member State level could be developed and a higher effectiveness of policy tools and approaches be aimed at.

4 C-42/07 (Liga Portuguesa de Futebol Profissional, Bwin International Ltd, v. Departamento de Jogos da Santa Casa da Misericórdia de Lisboa), point 69. 85

Practical Implications of the Santa Casa Judgment Justin Franssen and Frank Tolboom

1. Introduction: The Santa Casa Judgment1 The judgment ensues from the reference for a preliminary ruling filed within the context of legal proceedings between, Liga Portuguesa de Futebol Profissional and Bwin International Ltd (hereinafter: Bwin) on the one hand and Departamento de Jogos da Santa Casa da Misericórdia de Lisboa (hereinafter: Santa Casa) on the other hand, relating to fines imposed by Santa Casa on the first-named parties because they had infringed Portuguese legislation governing the provision of games of chance. By referring the matter for a preliminary ruling, the Portuguese national court wished to establish whether Community law precludes the national legislation of a Member State that grants a single entity the exclusive right to operate lottery and off-course betting, and extends that exclusive right to include the internet.2 Before examining the judgment and its potential practical consequences in further detail, consideration is given to current case law on the subject of gambling regulation.

2. Trends in European Gambling Related Case Law 2.1. The Common Denominator: Margin of Discretion The Schindler case marks the first ruling rendered by the European Court of Justice (hereinafter: ECJ) on the relationship between freedoms under the Treaty and

1 Santa Casa, Case C-42/07, Liga Portuguesa de Futebol Profissional and Bwin International Ltd/ Departamento de Jogos da Santa Casa da Misericórdia de Lisboa, n.y.r. 2 Santa Casa, para. 28. Littler et al. (eds.), In the Shadow of Luxembourg, 87–103 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

national regulations restricting the provision of games of chance.3 That judgment lays the foundation for a certain margin of discretion by national authorities in regulating games of chance. The ECJ holds that Member States must have sufficient latitude with which to determine what is required to protect players and, more generally speaking and taking into account the specific social and cultural features of each Member State, to protect social order where games of chance are concerned.4 The margin of discretion of a Member State in regulating games of chance is reiterated in consecutive gaming cases, and is confirmed in the more recent case of Santa Casa.5 The preference for a total ban, single licensing system or a multiple licensing system is primarily a discretionary choice taken by the national legislator. The margin of discretion, however, is subject to terms and conditions which have progressively taken shape as the case law develops. Within this context, the ECJ established a step-by-step reasoning:6 1) Is there a restriction of freedom under the treaty? If so, 2) Is there a justification pursuant to Article 45 and 46 EC Treaty in conjunction with Article 55 EC Treaty, or on grounds of compelling reasons of public interest, and, if so 3) Is the restriction proportional, in other words appropriate and necessary? Looking at the first step, it is clear that a total ban (Schindler), a single licensing system (Läärä) or a system of multiple licensees (Gambelli and Placanica), restricts the freedom to provide services, notwithstanding that the regulation may apply without distinction as to the nationality of the supplier. Prior to Gambelli, the prime focus was on step two, with particular emphasis on the presence of a formal justification.7 For example, provisions for the free movement of services are not incompatible with restrictive measures if they are justified by compelling reasons of public interest such as consumer protection, the prevention of fraud or

3 Schindler, Case C-275/92, Her Majesty’s Customs and Excise v. Gerhart Schindler and Jorg Schindler, [1994] ECR I-1039. 4 Schindler, para. 61. 5 Läärä, Case C-124/97, M. J. Läärä, Cotswold Microsystems Ltd, Oy Transatlantic Software Ltd v. Kihlakunnansyyttäjä (Jyväskylä) and Suomen valtio (Finnish State), [1999] ECR I-6067, para. 35; Zenatti, Case C-67/98, Questore di Verona v. Diego Zenatti, [1999] ECR I-7289, para. 33 and Anomar, Case C-6/01, Associação Nacional de Operadores de Máquinas Recreativas (Anomar) and Others v. Estado português, [2003] ECR I-8621 para. 79. 6 Gambelli, Case C/243-01, Criminal Proceedings against Piergioro Gambelli and Others, [2003] ECR I-13031, para. 67. 7 Hoekx, N., ‘Kansspelen in Europa; Placanica. De rechtspraak van het Hof van Justitie en het verlossende woord dat nooit zal komen’, Tijdschrift voor Consumentenrecht en handelspraktijken, 2007-5, 148–155, 88



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inciting consumer squandering, and the prevention of social problems in general.8 Avoiding a reduction in taxable revenues or financing social activities with revenues received from licensed games of chance do not form justifiable reasons.9 It goes without saying that the restrictive measure may not be discriminatory. Whilst the ECJ indicates in Schindler that, in terms of the third step, a total ban may be required, it fails to deal with the proportionality of the measure. In all likelihood this is probably because the Court did not examine the proportionality of the restrictive measure, given that the justification grounds referred to above already justify the margin of discretion adopted by the Member State. The proportionality of a total ban is therefore no longer relevant. Ergo, the ECJ allows the Member States a wide margin of discretion, with no form of guidance, to regulate games of chance. The same margin of discretion was seen in Läärä, in which it was also ruled that the application of the proportionality test in a Member State may not be influenced by the fact that another Member State may have opted for a different system of protection.10 Subsequent rulings in Zenatti and Anomar do not restrict the significant margin of discretion demonstrated in Schindler. However, in the Zenatti case the ECJ added one nuance, namely: the national court is required to determine whether the restrictive measure effectively meets the objective that is presented as grounds for its justification.11 A mere formal justification serving the public interest (such as combating crime and fraud, the prevention of gambling addiction and consumer protection) no longer suffices. Unfortunately, the ECJ has failed to implement this step-by-step reasoning consistently in all gaming cases. One primary concern is that there is a lack of an unambiguous application of the proportionality principle. 2.2. Application of the Proportionality Principle: A Different Approach? The Gambelli ruling signalled a gradual change of course by the ECJ. In addition to the requisite justification grounds, there was an explicit shift in emphasis to the third step, namely the test of proportionality. The ECJ enhanced the final phase of the step-by-step reasoning, by adding that measures imposed under national legislation governing games of chance are only suited to the objective or objectives if those measures are pursued in a consistent and systematic man-

8 Gambelli para. 67. 9 Schindler para. 60, Zenatti para. 36, Gambelli paras. 61–62. 10 Läärä, para. 36. 11 Zenatti, para. 37. 89

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ner. The authenticity of the justification claimed requires verification in every instance. This reasoning was subsequently confirmed in Placanica. 12 The proportionality test is clearly stepped-up in the Italian cases. The ECJ not only refers to the ‘rule of reason’ in Gebhard,13 but explicitly expounds on the subject. Moreover, it appears to seek alignment with the case law on double regulation, as stated in Webb.14 In Gambelli, the ECJ remarked that the national court must take into account the fact that gambling service suppliers are already subject to regulation in their Member State of establishment.15 In its subsequent reasoning, the ECJ asserts that the total exclusion of non-domestic service providers from the tendering procedure is disproportionate, given that the measure goes beyond what is necessary to combat fraud.16 This same line of reasoning is reconfirmed in the later case of Placanica, where the ECJ states that: ‘independent of the question whether the exclusion of companies quoted on the regulated markets applies, in fact, in the same way to operators established in Italy and to those from other Member States, that blanket exclusion goes beyond what is necessary in order to achieve the objective of preventing operators active in the betting and gaming sector from being involved in criminal or fraudulent activities.’ There are other ways of monitoring the accounts and activities of operators in the betting and gaming sector which impinge to a lesser extent on the freedom of establishment and the freedom to provide services.17 The ECJ also steps-up the proportionality test in a third Italian case (Commission v. Italy): automatic renewal of the old gaming concessions is regarded as being disproportionate, since it does not form an appropriate measure through which to secure the objective pursued by the Italian Republic, and goes beyond what is necessary to prevent operators in the horserace betting sector from becoming involved in criminal or fraudulent activities.18 This ECJ ruling came after the infringement procedure which the European Commission commenced in April 2006 by sending a letter

12 Cases C-338/04, C-359/04 and C-360/04 Criminal proceedings against Placanica, Palazzese and Sorricchio, [2007] ECR I-1891, para. 49. 13 Case C-55/94, Reinhard Gebhard v. Consiglio Dell’Ordine degli Avvocati e Procuratori di Milano, [1995] ECR I-4165. 14 Webb, Case 279/80, Criminal Proceedings against Alfred John Webb, [1981] ECR 3305, paras. 19–20. 15 Gambelli, para. 73. 16 Gambelli, para. 74. 17 Placanica, para. 62. 18 Case C-260/04, Commission of the European Communities v. Italian Republic, [2007] ECR I-7083, para. 34. 90



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of Formal Notice and focused on an alleged breach of the freedom to provide services (under Article 49 of the EC Treaty) in the field of sports betting. 2.3. Conclusion Although in Schindler and Läärä the Member States were allowed considerable leeway to regulate games of chance, the ECJ appears to apply a more stringent assessment standard in Gambelli and Placanica, effectively curtailing the margin of discretion previously afforded in Schindler. In stepping-up the proportionality test, particularly where games of chance operated within a multiple-licence system are concerned (Gambelli, Placanica, case C-260/04), an increased number of hurdles must be overcome if the restrictive measures are to stand up to the proportionality test. It is evident from the ‘Italian cases’ that, whilst the principle of mutual recognition may not come into play, the fact that a supplier of games of chance is already licensed in another Member State does indeed play a role in the proportionality test.

3. Santa Casa in Relation to Previous Case Law 3.1. Introduction As already discussed in paragraph 2.1, Schindler and Läärä are reconfirmed in Santa Casa, where the ECJ acknowledges yet again the margin of discretion on gambling afforded to Member States.19 The ECJ upholds the freedom of choice held by Member States to determine the manner in which games of chance are provided. Naturally, Member States are required to respect the rules of play within the prescribed margin of discretion. Compared to Gambelli and Placanica, the ECJ appears to revert to a somewhat ‘lighter’ proportionality test. It is also striking that in Santa Casa, the ECJ reformulated the reference for a preliminary ruling filed by the Portuguese court. The court of referral ostensibly asks how a monopoly relates to Community Law, whilst the ECJ has focused on the principle of mutual recognition.20 The resultant outcome is that the Santa Casa ruling only addresses the question whether the provider, established and licensed in another Member State, may provide services in Portugal on basis of that foreign licence, alongside the Portuguese monopolist. This differs from the previous three Italian cases (Gambelli, Placanica, Commission v. Italy) insofar as those cases related to a multiple-licence system, and to the question whether the foreign licensee could qualify for an Italian licence.

19 Placanica, paras. 57–59. 20 Santa Casa, para. 50. 91

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3.2. Explicit Rejection of Mutual Recognition By reformulating the reference question posed by the national court, the ECJ, albeit unnecessarily, puts an end to the discussion on the applicability of the principle of mutual recognition. In this context the ECJ states:21 ‘it should be noted that the sector involving games of chance offered via the internet has not been the subject of Community harmonisation. A Member State is therefore entitled to take the view that the mere fact that an operator such as Bwin lawfully offers services in that sector via the internet in another Member State, in which it is established and where it is in principle already subject to statutory conditions and controls on the part of the competent authorities in that State, cannot be regarded as amounting to a sufficient assurance that national consumers will be protected against the risks of fraud and crime, in the light of the difficulties liable to be encountered in such a context by the authorities of the Member State of establishment in assessing the professional qualities and integrity of operators.’ Consequently, it will no longer suffice for foreign licensed operators of games of chance to invoke their foreign licence in order to gain access to other Member State markets in which a legitimate monopolist is active. Where previously in Gambelli the ECJ sought to find a degree of alignment with the path of mutual recognition, it now evidently wishes to leave this path altogether, at least where licences for internet gaming are concerned. Unfortunately the clarification of this explicit rejection is scant at best. 3.3. Application of the Proportionality Principle The ECJ restates the classical considerations from earlier gaming cases and asserts that in assessing a justified restriction, it is necessary to examine in particular whether the restriction is suitable, whether it does not go beyond what is necessary, and whether it is applied without discrimination.22 Reference is also made to the ‘hypocrisy test’ (following Gambelli), namely that a restriction is suitable, provided it accomplishes the pursued objectives in a consistent and systematic manner. However, the ECJ provides no further commentary on this in its substantive assessment.

21 Santa Casa, para. 69. 22 Santa Casa, para. 60. 92



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3.3.1. Suitability Test The ECJ asserts that a strictly-controlled single operator such as Santa Casa may be regarded (in the case at hand) as an appropriate measure for the purpose of protecting consumers against fraud.23 In principle this reasoning is not new, since it has already been established in Läärä that Member States are at liberty to determine their own level of protection.24 There are, however, two salient points. Firstly, it is notable that precisely after Lindman, the burden of proof placed on the Member State is nothing short of being extremely flimsy.25 The ECJ readily accepts the observation that Santa Casa is a strictly-monitored body, and that the Portuguese national government is able to effectively monitor and control Santa Casa through an appointed administrative authority. However, neither the Portuguese national government nor the ECJ elaborate on what such strict monitoring precisely entails. The burden of proof is evidently even more negligible than in the previous case of Placanica.26 Moreover, the dual task of operator and regulator held by Santa Casa is totally overlooked, notwithstanding that the situation creates, to say the very least, an apparent conflict of interest. The ECJ seems all too quickly prepared to accept the theoretical stance adopted by Portugal. This stance is, in our opinion, subject to debate, given that the assessment of the suitability of the monopoly forms a constituent element in the substantive evaluation by the ECJ. Secondly, the judgment shows that the ECJ has also examined the suitability of the monopoly in relation to the Portuguese policy objective of combating crime. Ostensibly this answers the reference question filed by the national court. However, this is somewhat remarkable, given that the ECJ initially reformulated the reference question. According to the interpretation given by the ECJ, the national court wished to know whether ‘Article 49 EC precludes legislation of a Member State, such as that at issue in the main proceedings, which prohibits operators, such as Bwin, which are established in other Member States, in which they lawfully provide similar services, from offering games of chance via the internet within the territory of that first Member State.’27 With this approach the ECJ seems to avoid the need to discuss the necessity of a monopoly.

23 Santa Casa, para. 67. 24 Läärä, para. 35. 25 Case C-42/02, Diana Elisabeth Lindman, [2003] ECR I-13519, para. 26. 26 Placanica, para. 56. 27 Santa Casa, para. 50. 93

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3.3.2. Necessity Test By determining that the monopoly position held by Santa Casa serves as a suitable means through which to achieve the Portuguese objectives, the ECJ was more easily able to reject the principle of mutual recognition.28 It is not an implausible viewpoint that the margin of discretion afforded to Member States could be eroded if, say, a Member State, observing the requirements imposed by Community Law, has introduced a (justified) monopoly system, and is then subsequently required to acknowledge licenses issued in other Member States. The ECJ deals further with the necessity test by ruling that the authorities of the Member State of establishment cannot assess the integrity of its licensed operators, in relation to the prevention of fraud and crime.29 This clearly diverts from previous case law. The implication is that a licensing authority of a Member State is incapable of assessing whether a provider of games of chance from within its jurisdiction is indeed suitable to market its games of chance to consumers in another Member State. This demonstrates little confidence in Member States that issue gaming licenses. It seems that licenses issued by other Member States are of no relevance. Since the ECJ has commented on the necessity of a ban on operators from other Member States, as opposed to the necessity of establishing a monopoly, the question remains whether there are less-infringing alternatives available to endorse current policy objectives. It is highly questionable whether the restriction (monopoly) is really ‘functionally needed’.30 The ECJ refrains from answering these questions and adheres to the established approach taken in Schindler and Läärä, stating first and foremost that Member States are at liberty to determine their policy objectives on betting and gaming and, where appropriate, to define in detail the level of protection sought.31 Presented in this manner, the ECJ appears to avoid the politically sensitive issue of the necessity of a monopoly system, and leaves the concrete assessment to the national court. Finally, in addition to the proportionality test, the ECJ implies that because of the lack of direct contact between consumer and operator, games of chance accessible via the internet present more substantial risks of fraud by operators against consumers than in the traditional gaming markets.32 Moreover, the

28 Compare chapter 2.3 and Santa Casa, para. 69. 29 Santa Casa, para. 69. 30 Case E-3/06, EFTA/Ladbrokes Ltd. v. The Government of Norway, Ministry of Culture and Church Affairs and Ministry of Agriculture and Food, delivered on 30 May 2007, available at . 31 Santa Casa, para. 59. 32 Santa Casa, para. 70. 94



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ECJ does not rule out the possibility that sponsoring could lead to fraud.33 The question is whether these arguments can be validly used to exclude foreign licensees, since we fail to see how domestic licensees avoid exposure to the same potential dangers. It is remarkable that the ECJ applies these assumptions in its proportionality test without any further reference or substantiation whatsoever. 3.4. Conclusion In line with Läärä and Schindler, the ECJ stated first and foremost in Santa Casa that Member States enjoy a wide margin of discretion to regulate games of chance provided via the internet and with this the ECJ apparently reverts to the, in essence, nationally oriented approach for the regulation of games of chance. Moreover, it appears that the Court again applied a ‘lighter’ proportionality test in comparison with that applied in Gambelli. The ECJ adroitly reformulated the reference question submitted by the national court, which resulted in a response solely on whether the monopoly is suitable, but not whether the monopoly also passes the necessity test. Hence, the question on whether Portugal’s similar policy objectives could be realised by less restrictive alternatives than the establishment of a monopoly, remains unanswered. Furthermore, the ECJ fails to assess whether the restrictive measure is ‘functionally needed’.34 The arguments or theoretical arguments in defence of the monopoly or state monopoly were too readily assumed by ECJ. Consequently, given the political sensitivity, it seems that the ECJ did not dare call the national monopolies of the Member States into question. A clear breach of the course set in Gambelli and Placanica concerns the explicit dismissal of the principle of mutual recognition. The ECJ ruled that a licence from one Member State to provide online games of chance did not automatically mean that those games of chance could be provided in another Member State. Consequently, it can be concluded that the principle of mutual recognition has died a peaceful death. Pursuant to the reasoning put forward by the ECJ, it is difficult for the Member State of establishment to assess the quality of the foreign operator. This could mean that online gaming operators must first establish themselves in the Member State in which they wish to provide their services to actually be able to meet the standards set by the Member State of establishment. Nonetheless, it is true that Santa Casa, puts an end to the discussion between licensed operators (who rely on their licences to provide their services in the whole European Union) and monopolists, but the judgment must be placed in the specific context of the Portuguese situation. Santa Casa does not indicate whether a Member State with multiple licensees should allow for licences and

33 Santa Casa, para. 71. 34 Compare with the decision of the EFTA Court in Ladbrokes v. Norway, supra note 30, para. 55. 95

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the monitoring thereof from another Member State. For the time being these questions remain unanswered. In addition to Portuguese gaming legislation, the ECJ is due to comment on Dutch, German, Austrian and Swedish gaming legislation in relation to Community Law. The Opinions rendered by the Advocates General in the abovementioned gaming cases have, at the time of writing, been made public and are subsequently discussed.

4. Discussion on the Subsequent ECJ Proceedings 4.1. AG Bot: Joined Cases of Betfair and Ladbrokes 35 In the Betfair proceedings, an important point raised in the submission was the licence allocation procedure in the Netherlands. The questions in the Ladbrokes proceedings queried, amongst other issues, the compliance of Dutch gambling regulations with the principle of coherence required under Community law. A common factor in both proceedings is the question whether the freedom to provide services requires mutual recognition of licences for operations of games of chance between the Member States. In line with Santa Casa AG Bot rejects the application of the principle of mutual recognition.36 As to the question whether, under European law, a certain degree of transparency and equal treatment should be ensured when a single licence is issued to gambling operators by an official body, AG Bot confirms previous case law (Commission v. Italy). The licensing authority must ensure a suitable degree of openness for the benefit of all interested companies. Hence, the position of transnational operators is clearly supported. In his assessment, AG Bot made a remarkable statement with respect to the coherence of gambling regulation. He stated that even a ‘potential danger’ of fraudulent activity during gambling operations is a sufficient ground for restriction of Article 49 EC by the Member State. If and to the extent that the ECJ follows this finding, it will seriously affect the application of the freedoms of movement. After all, every economic sector where there is a ‘potential’ for fraudulent activity would become susceptible to protectionism, possibly resulting in arbitrary state monopolisation.

35 Betfair C-203/08 and C-258/08, Opinion of Advocate General Bot delivered on 17 December 2009, The Sporting Exchange Ltd., trading as Betfair v. Minister van Justitie and Ladbrokes Betting & Gaming Ltd., Ladbrokes International Ltd. v. Stichting de Nationale Sporttotalisator. 36 Betfair/Ladbrokes, para. 120. 96



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4.2. AG Bot: Winner Wetten37 The Opinion concerned questions on the compatibility of German gambling laws with EU law. AG Bot referred to the joined Betfair/Ladbrokes case as mentioned above and stated that Member States have a wide discretion on how to implement gambling legislation. However, AG Bot concluded that a national court cannot uphold national legislation if it believes that such legislation constitutes an unjustified restriction of the freedom to provide services, even if this legislation is for a transitional period. Furthermore, AG Bot confirmed that national legislation must be applied in a consistent and systematic manner and the national court must determine whether or not this condition has been met. 4.3. AG Mazak: Engelmann 38 and AG Bot: Sjöberg39 In the Engelmann case, the national court in question sought guidance as to whether Austrian Authorities could legitimately prosecute Engelmann (a German national). Engelmann provided games of chance without the required Austrian licence. AG Mazak concluded that rules, which require operators to be Austrian-established companies, are a form of direct discrimination. AG Mazak also stated that, given the Opinion of AG Bot in the joined cases Betfair/ Ladbrokes, the licences ought to be allocated in a transparent and public manner. Furthermore, AG Mazak found that the Austrian Authorities failed to provide sufficient evidence justifying the licensing process. AG Bot frequently referred to Santa Casa in the Sjöberg case, stating once again that Member States have a wide margin of discretion. In addition, he opined that gambling monopolies had the right to advertise their products in an adequate manner in order to present an attractive legal alternative to an illegal offering. In summary, both cases dealt with the rights of Member States (e.g Austria and Sweden) to regulate gambling within their territories. Both Advocates General again confirmed the wide margin of discretion of the Member States and did not challenge the right to maintain monopolies in the gambling sector. As regards the proportionality principle, AG Mazak (like AG Bot in Winner Wetten) stated that it is up to national courts to determine whether or not the gambling policy is inconsistent.

37 Winner Wetten, Case C-409/06, Opinion of Advocate General Bot delivered on 26 January 2010, Winner Wetten GmbH v. Mayor of Burgermeistern. 38 Case C-64/08, Opinion Advocate General Mazak delivered on 23 February 2010, Staatsanwaltschaft Linz v. Engelmann. 39 Joined Cases of C-447/08 and C-448/08, Opinion Advocate General Bot, delivered on 23 February 2010, Otto Sjoberg v. Aklagaren and Anders Gerdin v. Aklagaren. 97

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4.4. AG Mengozzi: Carmen Media 40 and Markus Stoß 41 In the Carmen Media case and in the joined cases, Markus Stoß and others, the German Administrative Courts put forward two similar questions: does the freedom to provide services preclude national monopolies from certain gambling activities and secondly, should a gambling operator established and licensed within one Member State be allowed to provide its services in another Member State? In the Carmen Media case, AG Mengozzi opined that to rely on the freedom of services, the service provider must, on the basis of the licence allocated by the Member State of establishment, be allowed to provide the relevant service within the territory of that State. As Carmen Media is established in Gibraltar and the licence allocated there only permits the provision of offshore games of chance, AG Mengozzi found that Carmen Media could not rely on the free movement principles under EU law. As the authorities of the home Member State do not permit the relevant activity to be carried out within the territory of that State, AG Mengozzi accordingly found: ‘it difficult to maintain that the public interest that another Member State wishes to protect, is adequately safeguarded by them. There is only mutual recognition if the home Member State executes controls that are equivalent to those required in the destination Member State.’42 With respect to Stoß, AG Mengozzi once again confirms that state monopolies could be compatible with Community law and he found it unrealistic to ban monopolies from promoting their services. With respect to the second question, the application of mutual recognition, AG Mengozzi found that the principle cannot be used because of the following factors: 1. A lack of harmonisation, 2. The acceptance of monopolies and other restrictions with respect to games of chance in the case law; and 3. The assumption that the offshore licences (as used in Malta and Gibraltar) are not suitable for mutual recognition.

40 Carmen Media, Case C-46/08, Opinion Advocate General Mengozzi, delivered on 4 March 2010, Carmen Media Group Ltd v. the Lander Schleswig-Holstein. 41 Markus Stoß, Joined Cases, C-316/07, C-48/07, C-360/07, C-409/07 and C-410/07, Advocate General Mengozzi delivered on 4 March 2010, Markus Stoß v. Wetteraukreis and Others. 42 Carmen Media, para. 36. 98



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5. Practical Implications of the Santa Casa Ruling and Opinions of the Advocates General 5.1. Implications for National Gambling Policies The Opinions of the Advocates General closely follow the views outlined in Santa Casa and make clear that Member States have a wide discretion to impose restrictive rules where adequately justified. The national courts of Member States must determine whether the gambling policy is actually being applied in a consistent and systematic manner. Nevertheless, the explicit rejection of mutual recognition in Santa Casa has ended the discussion between private operators of games of chance and monopolists/state monopolists. Henceforth, Member States in which legitimate monopolists are active, may prohibit operators that have a licence from another Member State from providing their services online to its citizens. In Santa Casa, the ECJ stated that it was difficult for the Member State of establishment to determine the quality of the operator. Moreover in Stoß, AG Mengozzi stated that licences granted in Malta and Gibraltar undermines the mutual trust between Member States and thus the application of mutual recognition. 5.2. Implications for Private Operators This could have significant implications for the business of gambling operators with offshore licenses. Member States wishing to retain gambling monopolies will argue that the ECJ clearly found in their favour. Consequently, gambling operators may no longer move freely in the European gaming market relying on the supremacy of Community law in that context. This could possibly mean the end of ‘gambling hubs’ such as Malta and Gibraltar. The reasoning of the Court in Santa Casa concerning the rejection of the mutual recognition principle could possibly lead to a complete fragmentation of the European gaming market. An operator would need to establish himself in each Member State, or he would at any rate need to apply for a licence so as to meet the criteria set there, given that only that Member State may determine whether the interests to be protected are adequately safeguarded. In other words, a licence for the organisation of online games of chance granted by a competent authority of a Member State only applies to the territory of that same Member State. The aforementioned approach will, however, be deemed most undesirable. We hold the view that free movement principles established by the EC Treaty will be rendered illusory if each gaming operator is obliged to follow a procedure to qualify for a gaming licence in each Member State. Before we elaborate on this, it must be taken into account that the practical implications of Santa Casa are less far-reaching than they ostensibly appear. First of all, the Santa Casa judgment may not be generalized as it provides no definitive answers to specific restrictions in individual Member States. The ECJ

99

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only answers the question whether an operator with a licence from another Member State may automatically provide his services in a Member State that has a monopoly. The ECJ gives no definitive answer to the question whether a Member State with a multiple-licensee system should allow for the licence and the ensuing regulatory measures of another Member State on application for a licence by a foreign operator.43 As a consequence, the issues as presented in Gambelli and Placanica will be reverted to in that respect. A trend is also discernible in the Member States signifying the shift in a debate on total bans and monopolies to the discussion on local licensing and the allocation of the relevant licences.44 As regards the allocation of licences, both AG Bot in the case of Betfair/Ladbrokes and by AG Mazak in the matter of Engelmann 45 confirmed existing case law, which includes the statement that in situations where a restrictive policy is pursued, the allocation policy must be equal, transparent and honest so that the allocation procedure can be tested for impartiality. This is also pertinent given that in reality more and more Member States are seeking some form of licensing/multiple licensing for remote games of chance. Italy, France, Denmark and Belgium have adopted or are in the process of a regulated opening-up of their respective remote gaming markets. It is anticipated that the Netherlands and Spain will follow. In the Netherlands an investigation is currently being carried out into possible regulation of online games of chance. On 11 September 2009 the Dutch Council of Ministers agreed to install an Advisory Committee on remote gaming (Commission Jansen) which is investigating possibilities to regulate online gaming. Moreover, in the aftermath of the Santa Casa judgment it is, putting it mildly, somewhat remarkable that the Portuguese Minister of Sport has indicated that his government will explore a possible regulation of online betting following calls from the Head of the Portuguese Football League to end the ‘monopoly’ held by Santa Casa. 5.3. Remaining Questions Since any harmonisation at the EU level is not forthcoming and there is a discernible trend of Member States to adopt a regulated opening-up of the online gaming market, the discussion remains to what extent, on the award of a gaming licence to an operator already holding a licence from another Member State, the controls executed in that other Member State must be taken into account. It can be concluded from Santa Casa and the Opinions given by the Advocates General 43 N. Hoekx, ‘Kansspelen op het internet: heeft Bwin vs. Santa Casa de kaarten geschud?’, Tijdschrift voor Consumentenrecht en handelspraktijken, 2009-6, 246–253. 44 Case C-77/10, Reference for a preliminary ruling from the Corta Suprema di Cassiazone (Italy), Ugo Cifone v. Guidice delle indaginipreliminari del Tribunale di Trani, lodged 9 February 2010. 45 Compare with C-260/04, Commission v. Italy, [2007] ECR I-7083. 100



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that the path of mutual recognition has been closed. Nevertheless, dividing gaming regulation along the physical borders of the Member States will be deemed undesirable. If and insofar a gaming operator who wishes to be considered for a licence in another Member State (which also maintains a licensing system) is once more confronted with the same strict regulatory measures and rules, this approach has serious practical disadvantages. Moreover, it is quite possible that such a restriction of the freedom of movement provisions would not pass the proportionality test. Reference can also be made in this respect to the judgment in Webb.46 Here the ECJ stated that: ‘in order to maintain the principle to provide services the first requirement is that in considering applications for licenses and in granting them, the Member State in which the service is to be provided may not make any distinction based on the nationality of the provider of the services or the place of his establishment. The second requirement is that it must take into account the evidence and guarantees already furnished by the provider of the services for the pursuit of his activities in his Member State of his establishment.’47 Regarding local licensing systems it appears that the role of the proportionality test is by no means played out to the full extent possible. Furthermore, the set-up of the licensing process comes under stronger scrutiny from Community Law. From case Commission v. Italy and the Opinion of AG Bot in the Betfair/Ladbrokes case, as well as the Opinion of AG Mazak in the Engelmann it case can be derived that Member States have to apply the principle of transparency in the gaming sector for the award of licenses. Therefore Member States may need to conduct an open and transparent tender process potentially allowing foreign operators to bid for the gaming licences. 5.4. Solution: A Principle of Conditional Recognition? As there is no harmonisation of legislation at Community level and it seems as though the ECJ will not be able to provide the definitive answer to the gaming problem, a compromise must be found between the numerous approaches used by the various Member States. It is desirable that a balance is found between the applicable licensing requirements of the various Member States involved so that the Member State in which the service is being provided may not be allowed to once again subject the gaming operator to strict regulatory measures and requirements that he has already been subjected to in his home Member State. Consequently, we hold the view that application of the ‘conditional recognition

46 See Webb, paras. 19 and 20. 47 Author’s emphasis. 101

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principle’ could provide a remedy. Pursuant to this principle, each Member State should be entitled to issue and enforce its own gaming regulations at the national level yet it would also have to recognize the licence (thereby implicitly validating the relevant licensing requirements) of other Member States. Thus, the licence applicant would not be required to actually establish himself in the acceding Member State to provide and promote online games of chance in that jurisdiction. The aforementioned underlying principles are not new as, for example, the new Danish gaming legislation is based on this. If more competent licensing authorities concluded multilateral co-operation agreements, a consistent and systematic approach could be realised that would contribute to the current objectives of gaming policies as promoted in each individual Member State. If and to the extent that Member States agree on common operational and technical standards, these will smooth the way for a licensee based in one EU jurisdiction to possibly obtain a licence in another Member State. Described above are merely some of the key considerations. Further conditions are, of course, attached to the conditional recognition principle, but further discussion of these conditions falls outside the scope of this contribution. The purport of this bargaining initiative is, in any event, to ensure that both the margin of discretion of the Member States and fair competition amongst the gaming operators on the European market is taken into account. In addition, it is not implausible that this will mean an end to the continuous contention regarding the interpretation of the gaming policy of Member States in relation to Community Law which will forestall the threat of protracted legal proceedings.

6. Conclusion Given the great political sensitivity coupled with gaming regulations, the ECJ allows the Member States a certain margin of discretion. The ECJ is loath to challenge state monopolies or total prohibitions. An inextricable consequence is that the ECJ fails to acknowledge the mutual recognition principle. As long as the restrictive measures comply with the rules of play which should, in concrete terms, be judged by the national courts, then there is no violation of the freedom of movement provisions. Nonetheless, discussion about monopolies has shifted to local licensing and the allocation of gaming licences. It is irrefutable that there is a discernible trend where Member States are turning to a regulated opening up of the online gaming market. Moreover, the focus is no longer on the actual exclusivity of the licence itself but on the manner of granting such exclusivity. Licensing procedures must be transparent and objectively framed. It is true that mutual recognition has been swept aside but the question in systems with multiple-licensees is still whether the licensing authority must consider the regulatory measures and rules that an operator has already been 102



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subjected to in another Member State. The freedom of movement provisions will be rendered illusory if and insofar as gaming operators must follow a licensing procedure in each Member State separately. A more intensive proportionality test must be applied particularly towards systems that allow for multiple licensees. Now that harmonisation of games of chance at the Community level is not forthcoming and the ECJ refrains from any involvement in a comprehensive assessment of provisions of gaming regulation, a regulatory, bargaining initiative from the Member States is desired. In this way, the current legal uncertainty on the European gaming market could be brought to an end. The answer could be found in multilateral co-operation whereby application of the ‘conditional recognition principle’ could bring about a balanced and reasonable solution.

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Is There a Future for a Comprehensive EU Gambling Services Policy? Philippe Vlaemminck 1

1. Introduction After many years, the EU gambling debate has come to a point that it is now gradually taking shape within the EU institutions and between the EU Member States. On the other hand, several Member States are currently developing their own national gambling model, in response to market developments and the many instances of litigation which occur. The activities within the Establishment and Services Working Group of the European Council under the French Presidency have resulted in a constructive dialogue between the Member States, reflecting on the very specific nature of gambling services and the concerns the provision of such services brings forward in the different Member States. Indeed, several points of concern were brought forward, mainly in regard to the safeguarding of social order and consumer protection and in regard to the protection of public order. The Council especially urged for a solution to combat the illegal provision of online gambling services, given the rapid development of cross border gambling through the Internet.2 As from July 2009, the Swedish Presidency of the EU followed the approach of the French government and has continued the discussions between the EU Member States on topics such as the social cost of gambling, responsible gaming measures and sanctions and measures against illegal operators. This resulted in a Progress Report presented to the Competitiveness Council in December 2009.3

1 This article only expresses the views of the author and is not binding the clients of Vlaemminck & Partners bvba. 2 See Progress Report of the French Presidency of the EU, ‘Gambling and betting: legal framework and policies in the Member States of the EU’, 27 November 2008, 16022/08. 3 See Heldahl, E., ‘The Perspective of the Swedish Presidency on the Issue of Gambling’, elsewhere in this book. Littler et al. (eds.), In the Shadow of Luxembourg, 105–118 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

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While the European Parliament adopted on the 10 March 2009 a resolution on the integrity of online gambling,4 the European Court of Justice (ECJ) still has to rule in several preliminary cases which can and will have an impact on the future of gambling services in the EU.5 The ECJ always fully executed its role in the gambling cases by providing very well balanced rulings. From Schindler to Placanica, the Court has been consistent in its jurisprudence, and provided clarifications whenever required by the circumstances of the case at hand. Most recently, on 8 September 2009, the Court delivered a land mark ruling for the gambling sector in the Santa Casa case. Indeed, in this ruling, the Court has explicitly denied the application of the principle of mutual recognition in the gambling sector, which means the end of gambling hubs like Malta and Gibraltar.

2. The Current Status of Gambling Services in EU Law as a Starting Point for Further Political Discussions In light of the political debate regarding gambling services which recently started in the Council, the current legal framework designed by the ECJ jurisprudence and the EU secondary law should be taken into consideration as a starting point of further discussions on the future of gambling services in the EU. 2.1. The Case Law of the ECJ and EFTA Court Already in the well known Schindler case6 in 1994 and in the Läärä case in 1999,7 the ECJ ruled that Member States are, in the absence of harmonisation, entitled to prohibit or restrict gambling activities offered from other EU jurisdictions provided that the restrictions are not discriminatory and disproportionate and that they are intended to protect the consumer and to maintain order in society.8 In these cases, the Court further clarified that the Member States have in this area a broad discretion to decide about the type and volume of games and 4 EP resolution of 10 March 2009 on the integrity of online gambling, 2008/2215(INI). 5 Relevant preliminary cases currently pending before the ECJ: Case C-409/06, Winner Wetten; Joined cases C-316/07, C-358/07, C-360/07 and C-410/07, Markus Stoss and others; Case C-46/08, Carmen Media; Case C-64/08, Engelmann; Case C-145/08, Club Hotel Loutraki; Case C-203/08, Betfair; Case C-212/08 Zeturf; Case C-258/08, Ladbrokes; Case C-235/08 Langer; Case C-448/08, Sjöberg; and Case C-347/09, Dickinger. 6 Case C-275/92, Schindler, [1994] ECR I-1039. 7 Case C-124/97, Läärä, [1999] ECR I-6067. 8 Straetmans, G., ‘Case C-124/97, Läärä and Case C-67/98, Zenatti’, C.M.L.Rev., 37 (2000), 991–1005; Van Vondelen, E. A., ‘Kansspelmonopolies houden vooralsnog stand’, S.E.W., (2000), 203–207. 106



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the number of operators. The Court also recognised that the mere fact that a Member State has opted for a system of protection which differs from that adopted by another Member State cannot affect the assessment of the need for, and proportionality of, the provisions enacted to that end. Those provisions must be assessed solely by reference to the objectives pursued by the national authorities of the Member State concerned and the level of protection which they are intended to provide. The question whether it, in order to achieve the objectives pursued, would be preferable, rather than granting an exclusive operating right to the licensed public body, to adopt regulations imposing the necessary code of conduct on the operators concerned is a matter to be assessed by the Member States. This case law was subsequently confirmed by the Court in the Anomar case.9 The proportionality test applied by the Court in Schindler, Läärä, Zenatti and Anomar shows that national restrictions in sensitive sectors which involve moral, ethical or social policy considerations, such as the regulation of gambling activities, are subject to less strict scrutiny on grounds of proportionality. In its gambling jurisprudence, the Court has not given much guidance to the national judges why a prohibition (Schindler), a monopoly (Läärä, Anomar) or a licensing regime (Zenatti) should be considered to be necessary to limit gambling addiction or to prevent crime and fraud. In the Gambelli case,10 the Court was called upon to rule on the compliance of a national (Italian) betting legislation which prohibited (foreign or Italian) betting operators to accept offline and online bets from (Italian) customers unless they have received a licence with the principles of free movement. In its judgment of 6 November 2003, the ECJ has in essence confirmed its previous jurisprudence, but it gave the national court a number of guidelines to assess whether the Italian betting legislation infringes the EC Treaty. In line with its previous jurisprudence, the Court accepted that national legislation which confers exclusive rights to certain undertakings to take bets on sporting events does, as such, not constitute a violation of the EC Treaty, as long as this legislation is justified by objectives of social policy and consumer protection aimed at limiting the harmful effects of gambling activities. Hence, if these conditions are being complied with, national gambling monopolies and exclusive licenses do not violate the EC Treaty provisions. The Court added that national restrictions can only be justified if they reflect a concern to bring about a genuine diminution in gambling opportunities. The Court pointed out that it is up to the national court to verify whether the (Italian) restrictions are genuinely directed at realizing the public order aims. However, the Court warned, that national authorities may not invoke 9 Case C-6/01, Anomar, [2003] ECR I-8621. 10 Case C-243/01, Gambelli, [2003] ECR I-13031. 107

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these public order concerns, if they are in fact expanding and stimulating the gambling opportunities on their territory. The Court confirmed its findings in the Zenatti case by stating that restrictions to the free movement of gambling services must reflect a concern to bring about a genuine diminution of gambling opportunities and added that restrictions must serve to limit betting activities in a consistent and systematic manner. In the Lindman case,11 the ECJ found that Article 49 EC precludes a Member State from applying rules under which lottery winnings from lotteries held in other Member States are included in the taxable income of the winner upon an individual’s assessment with respect to income tax, whereas lottery winnings from lotteries held in the Member State in question are exempt from such taxation. The Finnish Government had contended that the Finnish restrictions were justified by overriding public interest objectives. In this context, the Court investigated the appropriateness and the proportionality of the Finnish restrictions. It declined to accept the Finnish public interest objectives, as no evidence was submitted to the Court as regards the risks connected to playing games of chance or the existence of a particular causal relationship between such risks and participation by Finnish nationals in lotteries organised in another Member State. It is clear from Gambelli and Lindman that gambling restrictions can only be justifiable by genuine and substantiated public interest considerations, aimed at limiting the gambling opportunities within the territory of a Member State. Although the Court did not adopt a radically different approach compared to its previous jurisprudence and although there remains a broad uniformity towards the validity of national gambling restrictions with the free movement principles, the jurisprudence on gambling did lead to legal uncertainty as to the extent of restrictions maintained by Member States and to the degree to which such national restrictions will be tolerated by the courts in the future. In the joined cases Placanica and others,12 where the compatibility of Italian law with the EC Treaty was again at stake, and afterwards in the EFTA ruling in the Ladbrokes case, the Court clarified the proportionality test in the area of games of chance and developed the theory of ‘controlled expansion’. According to the ECJ in the Placanica case and the EFTA Court in the Ladbrokes case,13 it is conceivable that a policy of controlled expansion in the betting and gaming sector is consistent with the objective of drawing players away from clandestine betting and gaming (Placanica) or highly addictive games (EFTA Ladbrokes case) to activities which are authorised and regulated.

11 Case C-42/02, Lindman, [2003] ECR I-13519. 12 Joined cases C-338/04, C-359/04, C-360/04 and C-480/04, Placanica and others, [2007] ECR I-1891. 13 Case E-3/06, Ladbrokes, available at . 108



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According to the Court, in order to achieve that objective, authorised operators must be able to represent a reliable, but at the same time attractive, alternative to a prohibited activity, which may as such necessitate the offer of an extensive range of games and advertising on a certain scale as well as the use of new distribution techniques. In the Placanica case, the Court also ruled on the issue of accessing the licence tender procedure. The Italian legislation at stake excluded all operators listed on the stock market from participating in a concession tender procedure, for reasons of combating criminal involvement in gambling. The only argument invoked was that the shareholders of such companies were not always identifiable. According to the Court there were sufficient alternative means available to check the accounts and activities of such an operator, without having to resort to measures with such restrictive effects. In those circumstances the Court ruled that this condition constituted an unacceptable restriction under Community law. Therefore the Court decided that, given the circumstances of the case in which a licence could only be granted to an operator holding a concession, applying criminal sanctions against the concerned operator for not abiding by the administrative formalities linked to the concession system was not acceptable. However, this ruling does not preclude a Member State from maintaining a concession system/licensing regime to operate games of chance, nor does it affect the right of such a Member State to apply criminal sanctions for violation of such concession/licensing requirements, to the extent that they are objectively justifiable and proportionate to the aims pursued. In the Placanica case the Court did expressly recognise this to be the situation in Italy. In a judgement of 14 March 2007, the EFTA Court rendered its ruling in the infringement procedure started by the EFTA Surveillance Authority (ESA) against Norway,14 for having enlarged the scope of the monopoly of the state owned lottery operator to the gambling machines market. According to the ESA Norway could not justify this restriction under the free movement of services and the freedom of establishment enshrined in the EEA Agreement. The European Economic Area Agreement applies to Norway, Iceland and Liechtenstein and the free movement rules laid down in the agreement are comparable to the EU Treaty principles. In the EFTA Court’s view: ‘it is reasonable to assume that a monopoly operator in the field of gaming machines subject to effective control by the competent public authorities will tend to accommodate legitimate concerns of fighting gambling addiction better than a commercial operator or organisations whose humanitarian or socially beneficial activities partly rely on revenues from gaming machines. Furthermore, it is plausible to assume that in 14 Case E-1/06, ESA v. Norway, available at 109

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principle the State can more easily control and direct a wholly Stateowned operator than private operators. Through its ownership role, the State has additional ways of influencing the behaviour of the operator besides public law regulations and surveillance. In fact, the effectiveness of public control and enforcement of a genuinely restrictive approach to machine gaming are the focal point of the proportionality assessment in this case.’15 The importance of this case lies in the fact that it is the first infringement procedure concerning games of chance and includes a discussion of the extension of a gambling monopoly. The ruling did also clarify that each sub-sector of gambling could be subject to different rules depending upon the risks and addictiveness of the type of gambling concerned. This argument was largely developed by the EU Commission during the oral hearings before the EFTA Court in this case. In the EFTA Ladbrokes case,16 the EFTA Court had to formulate an advisory opinion related to the Norwegian sport betting market.17 Regarding the issue of the marketing of games from another jurisdiction on the territory of a EEA Member State, the EFTA Court provided new guidance by stating that, in case the restrictions maintained are found to be lawful, the national authorities have the right to ban the cross-border promotion and provision of games of chance, no matter whether they are lawful in the state of origin or not. The EFTA Court added that even if the restrictions are found to be unlawful, the state can still require a licence in view of the possible differences in the level of protection desired in the Member State concerned. This approach is expressed in paragraph 59 of the judgment: ‘If it turns out that the national authorities have opted for a rather low level of protection, it is less probable that a monopoly is the only way of achieving the level of protection opted for. In that case, it is more likely that less restrictive means, for instance in the form of a licensing system which would allow an operator such as the Plaintiff to enter the market, could suffice. In this context, it is also relevant to assess whether channelling, to the extent the national court deems this to be relevant, could be achieved equally well under a licensing system.’

15 Ibid., para. 51. 16 Case E-3/06, Ladbrokes Ltd. v. The Government of Norway, Ministry of Culture and Church Affairs and Ministry of Agriculture and Food, available at . 17 An advisory opinion of the EFTA court is comparable to a preliminary ruling of the ECJ, except that an advisory opinion is not binding upon the national court which referred the question concerned to the EFTA court. 110



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In that regard, it is important to highlight that the EFTA Court has not accepted the principle of mutual recognition, as was argued by Ladbrokes. This is even more clearly stated in paragraph 85 of the judgement, whereby the Court says that: ‘(…) Even if the legislation and practice in the home State of the operator ensures a high level of protection in relation to the sociological features characterizing that state, this may not necessarily amount to the same level of protection with respect to the features characterizing the state where the services are to be provided.’ On 8 September 2009, the ECJ delivered finally its long awaited ruling in the Santa Casa case,18 which was a clear victory for the EU Member States. In this case, the Court further extended its previous case law on the validity of an exclusive right in the gambling sector to an exclusive right system regarding the online provision of gambling services. In paragraph 67 the ECJ acknowledges that the grant of exclusive rights to operate games of chance via the internet to a single operator, which is subject to strict control by the public authorities, may, in circumstances such as those in the proceedings, confine the operation of gambling within controlled channels and be regarded as appropriate for the purpose of protecting consumers against fraud on the part of operators. The most important achievement of this ruling is that the ECJ has explicitly denied the application of the principle of mutual recognition in the gambling sector. The ECJ states that: ‘in the absence of Community harmonisation, a Member State is entitled to take the view that the mere fact that an operator such as Bwin lawfully offers gambling services via the internet in another Member State, in which it is established and where it is in principle already subject to statutory conditions and controls on the part of the competent authorities in that State, cannot be regarded as amounting to a sufficient assurance that national consumers will be protected against the risks of fraud and crime, in the light of the difficulties liable to be encountered in such a context by the authorities of the Member State of establishment in assessing the professional qualities and integrity of operators.’19 This assessment goes quite far and means the end of remote gambling hubs such as Malta, Gibraltar etc. The ECJ indeed rules that the competent authorities in those jurisdictions (as the jurisdiction of establishment) cannot sufficiently guarantee the integrity and professional quality of the operators providing their services in another Member State, and that therefore the Member State

18 Case C-42/07, Liga Portuguesa de Futebol Profissional and Bwin International Ltd v. Departamento de Jogos da Santa Casa da Misericórdia de Lisboa, n.y.r. 19 Ibid., at para. 69. 111

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of residence of the consumer can maintain its own restrictive conditions and legitimately prohibit access to its market for such an operator. The judgment is very clear and the answer the ECJ formulates to the referred question does not leave any room for another interpretation: ‘Article 49 EC does not preclude legislation of a Member State, such as that at issue in the main proceedings, which prohibits operators such as Bwin International Ltd, which are established in other Member States, in which they lawfully provide similar services, from offering games of chance via the internet within the territory of that Member State.’20 It is clear the ECJ wanted to deliver a break through ruling on the principal issue of mutual recognition in the gambling sector, as it did not leave the national judge any scope for interpretation when applying the judgment to the facts of the case at hand. The ECJ ruled itself that a Member State is entitled as such to prohibit the provision of online gambling services within its territory by an operator established in another Member State. This leaves no further room for a proportionality assessment by the national judge as the answer is unconditional. 2.2. Secondary EU Law Related to Gambling Services There are two sets of directives which currently relate to gambling services in the EU. The first group has a more indirect impact on the gambling sector as it explicitly excludes gambling from the scope of the concerned directive. The main reason for these exemptions is that those directives implement a country of origin approach. The exemption means that the EU institutions clearly consider that gambling services cannot be regulated on a country of origin basis. This is totally in line with the jurisprudence of the ECJ. This group covers: – The Directive on Electronic Commerce21 which provides in Article 1 (5)(d) that ‘gambling activities which involve wagering a stake with monetary value in games of chance, including lotteries and betting transactions’ are excluded from the directive. This exclusion does not cover promotional competitions or games.

– The Services Directive22 which provides in article 2(2)(h) that ‘gambling activities which involve wagering a stake with pecuniary value in games of chance, including lotteries, gambling in casinos and betting transactions’ are excluded from the directive.

20 Ibid., at paras. 2 and 74. 21 Directive 2000/31/EC on certain aspects of information society services, in particular e-commerce, [2006] OJ L178/1. 22 Directive 2006/123/EC on services in the internal market, [2006] OJ L376/36. 112



Is There a Future for a Comprehensive EU Gambling Services Policy?



– The Audiovisual Media Services Directive23 which updates the Television Without Frontiers Directive. Here again, gambling is excluded from the application of the directive.

The second group of directives has a more direct impact on the provision of gambling services. The most important ones are the Notification Directive, the Third Money Laundering Directive and the VAT package. Directive 98/34/EC,24 as amended by Directive 98/48/EC, better known as the Notification Directive, sets up a procedure which imposes an obligation upon the Member States to notify to the Commission and each other all the draft technical regulations concerning industrially manufactured products and agricultural products and Information Society Services before they are adopted in national law. The Directive seeks to prevent the creation of new technical barriers to trade and lays down a procedure for the provision of information in the field of technical standards and regulations. It applies to all member States, the European Economic Area (Norway, Iceland and Liechtenstein), EFTA (Switzerland) and Turkey. The Third Money Laundering Directive is applicable to casinos,25 including on line casinos.26 According to Article 10 of the directive, Member States shall require that all casino customers be identified and their identity verified if they purchase or exchange gambling chips with a value of €2000 or more. Casinos subject to state supervision shall be deemed in any event to have satisfied the customer due diligence (CDD) requirements if they register, identify and verify the identity of their customers immediately on or before entry, regardless of the amount of gambling chips purchased. Moreover, according Article 36 of the directive, Member States shall provide that casinos be licensed in order to operate their business legally. Competent authorities shall have enhanced supervisory powers. The VAT-Directive foresees specific provisions for e-services supplied to consumers established in a Member State by a taxable person who has established its business outside the Community.27 Article 57, paragraph 1 of the 23 Directive 2007/65/EC amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities, [2007] OJ L332/27. 24 Directive 98/48/EC amending Directive 98/34/EC laying down a procedure for the provision of information in the field of technical standards and regulations, [1998] OJ L217/18. 25 Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, [2005] OJ L309/15. 26 Following recital 14 of the directive, these provisions are also to be considered to be applicable on online casino games. 27 Directive 2006/112/EC on the common system of value added tax, [2006] OJ L347/1. 113

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VAT Directive specifies that the place of taxation for e-services from a business outside the Community to a consumer inside the Community is the place where the consumer has its residence. According to this directive, operators providing e-gambling services from outside the Community are obliged to register and pay VAT in the country of consumption of the services (country of residence of the consumer). As from 2015 this obligation will also apply to e-gambling services provided from one Member State to consumers in another Member State. The importance of these directives is that they provide the Member States on whose territory gambling services are offered to their consumers with a supervisory and taxation competence. This initial framework, consisting of the ECJ case law on the one hand and the aforementioned EU secondary legislation on the other hand, should be the basis for the future discussions between the Member States in the Establishment and Services Working Group.

3. A Comprehensive Approach Based on Active Subsidiarity Both the Council of Ministers and the European Parliament have been calling recently for solutions in respect of the subsidiarity principle following the changes as a result of the growing importance of remote gambling. However, there seems to be a serious misunderstanding of what ‘subsidiarity’ actually means. Taking account of the guidelines outlined in Protocol 7 of the Amsterdam Treaty, it is clear that national and/or regional laws cannot provide a full and satisfactory response to all the challenges of the provision of gambling services through the internet. Moreover, the different emerging national legislations require legal certainty which can only be granted through an EU chapeau under secondary EU law. Subsidiarity therefore remains the initial ground for regulating the EU gambling markets whereby the basis has to be a national legal framework in line with the government’s discretionary policy choice supplemented by certain EU legislation. Indeed, the essentially transnational elements related to gambling can only be regulated on the European level. According to the Commission, certain problems related to gambling services, such as those created by the provision of services through the internet, necessitate that responsibilities evolve towards an ‘active subsidiarity’, based on clear objectives pursued in concerted fashion at all levels.

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4. Any Changes in the Market can Only be Based on a Precautious Approach The European Parliament resolution on the integrity of online gambling28 makes several references to the need for additional research and the risks of online gambling prior to act. This approach, known as the ‘precautionary’ approach, has already been recognised by the Commission in its communication of 2 February 2000. Furthermore, the principle is already incorporated in the Lisbon Treaty regarding environmental matters and is being applied in EU food law. The precautionary principle may be invoked when the potentially dangerous effects of a phenomenon, product or process have been identified by a scientific and objective evaluation, and this evaluation does not allow the risk to be determined with sufficient certainty. This was recognized recently by the European Court of Justice in two cases regarding the restrictions on ownership of pharmacies.29 In practice several gambling operators are already subject, in the context of responsible gaming, to a precautionary principle applied on the national level. In certain jurisdictions, for example, an impact assessment has to be made on the effects of a new game on the market before that game can be introduced to the players. In a broader European approach regarding certain forms of gambling or certain aspects of gambling, the precautionary principle could be introduced in an EU regulatory framework. It would only allow changes to market conditions to be made dependent upon the status of knowledge and risk assessment of both gambling addiction and crime prevention.30

5. Re-establishing the (Competitive) Balance in the Gambling Sector Law enforcement is still one of the major problems when it comes to implementing a justified restrictive gambling policy.

28 European Parliament resolution of 10 March 2009 on the integrity of online gambling, 2008/2215(INI). 29 Joined cases C-171/07 and C-172/07, Apothekerkammer des Saarlandes and others, and case C-531/06, Commission v. Italy, n.y.r. but available via . 30 See Opinion of Advocate General Bot of 17 December 2009 in Ladbrokes and Betfair, C-258/08 and C-203/08, para. 92, where he supports the application of the precautionary principle in the gambling sector by stating that ‘a Member State has the right to invoke the risk of fraud associated with gaming as the basis for legislation restricting that activity, without being required to show that fraud is actually being committed in its territory’. Several Member States are making the introduction of new games subject to a prior assessment or prohibit new forms if the risks are not sufficiently known. 115

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Operators providing their gambling services illegally on the territory of EU Member States often operate from jurisdictions where they benefit from substantial tax advantages. Mostly they operate from those tax havens with an off-shore licence, for example Malta and Gibraltar,31 based on which they are not even allowed to provide their gambling services on the territory of that jurisdiction. Those off-shore operators enter the market of the EU Member States which maintain justified restrictive gambling policies and deliberately put aside the national legislation in the country where they provide their gambling services. The practice of gambling operators operating from so-called off-shore jurisdictions, based on an off-shore licence, and providing their services illegally – unlicensed – in the EU jurisdictions is a clear abuse of the internal market and cannot be supported by any means. Moreover, the question of tax evasion is, in the current financial crisis, high on the political agenda. The situation whereby operators provide their services in a variety of EU markets without having obtained a national licence in the country of residence of the consumer and without abiding by the national law in the Member State where they provide the services, leads to unfair competition between those gambling operators strictly abiding by the rule of law and those advocating the free market to deny compliance with local legislation and therefore abuse the internal market to their own commercial benefit. To the extent that some Member States do respond to the concerns expressed by the Commission by setting up a new legal framework for remote gambling in line with the ECJ jurisprudence – like France and Italy – it is important that an adequate law enforcement system can be implemented and that the unfair competitive advantages obtained in an illegal manner are neutralised. In the new French law proposal, opening the French online market in a controlled manner, an explicit provision requires the shut down of ‘illegal client databases’ in order for an operator to obtain a licence under the new regime. This approach allows for fair competition to be re-established.

31 See Opinion of Advocate General Mengozzi of 4 March 2010 in Carmen Media, C-46/08, para. 21, where it is clearly stated that ‘Carmen Media received from the government of Gibraltar, where it is established, a ‘Gaming Licence’ which is limited to ‘remote gambling/ fixed-odds bets for offshore bookmaking’ and which allows it to only organise betting outside the territory of Gibraltar’ and in Markus Stoss, C-316/07, para. 104, where he refers to ‘the practice of Malta and Gibraltar to grant remote or offshore gambling licences’. The Advocate General heavily criticizes such off-shore licenses (see paras. 29–31, 36, and 43–47) in his Opinion in Carmen Media. 116



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6. The Specific Role of Lotteries in the European Society In a discussion on a sustainable EU policy for gambling services, the actors involved need to consider the ‘ancillary benefits’ of operating lotteries through a restrictive regime. According to the ECJ case law, lotteries may make a significant contribution to the financing of benevolent or public interest activities such as social works, charitable works, sports or culture, although this cannot in itself be regarded as an objective justification of a restrictive gambling policy. Outside the context of the EU Treaty, lotteries play a very important role in society by helping the fight against poverty and the funding and supporting of development aid policy (Barcelona Development Commitments),32 contributing to academic research programmes and adding to the development of the knowledge-based society (Lisbon European Agenda) and the funding of amateur and grass roots sports in line with the sports policy of the EU (EU Declaration of Nice). With regard to sport in particular, the Commission acknowledged in its White Paper on sport that in numerous Member States, sport is partially financed through the medium of taxes and levies on gambling and lottery services run by the State, or by state-authorised operators. In its White Paper, the Commission invited the Member States to reflect on the best ways of maintaining and developing a model of sustainable financing for the long-term support of sports organisations.33 In its resolution on the White Paper on Sports, the European Parliament recognised that lotteries and gambling operators are ‘by far the most important source of income in many Member States’.34

7. Guaranteeing a Sustainable Policy for Gambling in the EU: An EU Framework for Gambling Services A sustainable future for national gambling policies and for the stakeholders involved is not possible if the concerned national rules can continuously be challenged in court. The current situation proves that any proposed policy, even in line with the ECJ jurisprudence, is being attacked. There is clearly a need for legal certainty under EU law in order to guarantee a sustainable gambling policy.

32 See Presidency conclusions of the Barcelona European Council of 15 and 16 March 2002. 33 Commission White Paper on ‘Sport’, COM (2007) 391 final. 34 European Parliament resolution of 8 May 2008 on the White Paper on Sport, 2007/2261(INI). 117

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Moreover, the stakeholders involved (operators, customers, beneficiaries, interest groups) must get guarantees and legal certainty on their operations. Based on the aforementioned principles and starting from the existing initial legal framework, an EU framework must be created which is flexible and forward looking, and which requires an ongoing dialogue between the Member States and the Commission. An EU regulatory package on gambling should/could comprise the following elements: – A Framework Regulation for gambling services, outlining the basic principles applicable to gambling services in the EU, such as the Member States’ competence and discretionary power (choice of policy model), and the conditions for these principles to apply. The establishment of national gambling policies in conformity with the Framework Regulation could be made subject to a specific notification process. The further implementation of the Framework Regulation could involve a comitology procedure;

– A coordinated approach within this Framework for well defined aspects of gambling policy which cannot be adequately regulated at national level and/or would cause distortion if not regulated at EU level;



– A safeguard in order to ring fence the operation and role of lotteries in society; and



– Coordination of judicial cooperation and enforcement rules to fight illegal gambling, match fixing, money laundering and other crime related aspects of gambling.

8. Conclusions Since gambling services are services of a very particular nature, the general Treaty rules cannot be applied. One cannot deny the specificity of gambling in the EU regulatory debate. Gambling services indeed require a serious inter service and multi-pillar approach to guarantee that all risks are properly considered. Subsidiarity, precaution, solidarity, fair competition and law enforcement are substantive issues which need to be considered. Only in this way can a sustainable future for all stakeholders can be guaranteed. This challenge has to be taken up by the EU institutions in dialogue with the EU Member States. There will be a substantial role to be played by the Belgian Presidency of the EU during its term in the second semester of 2010, by determining the position of the Member States regarding the gambling related elements which require a European approach.

118

A View from the British Isles David Miers

1. Introduction This chapter concerns key aspects of the regulatory structure governing commercial gambling in England, Scotland and Wales; that is, Great Britain. The ‘British Isles’ is something of a misnomer; the Interpretation Act 1978 defines the ‘British Islands’, which comprises ‘the United Kingdom, the Channel Islands and the Isle of Man’;1 but with minor exceptions in the case of the United Kingdom the Gambling Act 2005 does not apply to these jurisdictions. The law of Northern Ireland remains as it has been for the past 50 years. Neither does the 2005 Act apply to the National Lottery, which is governed by its own legislative structure and is regulated by its own statutory body, the National Lottery Commission (NLC). The NLC and the Gambling Commission are statutorily obliged to consult each other on matters of common interest;2 but I shall not today be dealing with the Lottery. Nor, lastly, does the 2005 Act deal with what many would regard as a particularly seductive and dangerous activity – spread betting. This is a ‘contract for differences’ and is regulated by the Financial Services Authority. Here again, I shall not be addressing this particular financial transaction. Following this introduction Part 2 outlines the salience of commercial gambling in Great Britain. Part 3 summarises the regulatory structure created by the 2005 Act and its trio of regulatory controls – operating, personal, and premises licences. Part 4 comments on the Gambling Commission’s core statutory duties and its approach to regulation. Following a short Part (5) on remote gambling Part 6 focuses on the way in which the Gambling Commission has sought to 1 Interpretation Act 1978, s. 5. 2 Section 31 of the Gambling Act 2005 provides that the Gambling Commission must consult the National Lottery Commission (NLC) where it becomes aware of a matter concerning the exercise of its functions on which the NLC is likely to have an opinion. Schedule 3 to the 2005 Act amends section 4 of the National Lottery etc 1993 Act to impose a reciprocal duty on the NLC. Ready examples include problem gambling and player protection, and keeping children out of gambling. Littler et al. (eds.), In the Shadow of Luxembourg, 119–152 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

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give effect to the three licensing objectives with which the Act commences and that underlie the regulatory context. The gambling medium chosen to exemplify the Commission’s approach is gaming by means of machine. A short conclusion remarks on an important recent development concerning the Commission’s social responsibility agenda.

2. The Salience of Commercial Gambling in Great Britain 2.1. Participation The second British Gambling Prevalence Survey was published two years ago,3 confirming that the National Lottery is the primary medium by which British gamblers gamble. Of 32 million adults (68% of the adult population) who had participated in some form of gambling in the census year, 57% had participated in the National Lottery Draw and 20% had bought Lottery scratchcards. Horserace betting (17%) and playing slot machines (14%) were the next most popular. Participation in the football pools, once the principal gambling medium, sank from 9% to 3%; about the same rate as online and casino gaming (4% each). The rate of problem gambling was about 0.6% (234,000) of the adult population; in other words, for 99% of those who gamble, their participation appears to be unproblematic. These are broadly similar rates of participation to the first Survey published in 2000. The 2007 Survey captured data on new forms of gambling that had become available since then. These are playing fixed odds betting terminals (FOBTs) in a betting shop (3%), online betting with a bookmaker (4%), and use of betting exchanges (1%). Despite their low participation levels, the use of both FOBTs and betting exchanges generated high levels of problem gambling, and in the latter case, questions of betting integrity. The Gambling Commission is undertaking preparatory work for the 2010 survey. A new element that will be of special interest is that this survey will for the first time be able to make appropriate comparisons between pre- and postimplementation of the 2005 Act. It should provide the first reliable evidence supporting or refuting the question whether the Act would lead to an increase in problem gambling. 2.2. Spend In 2006/07 turnover in the gambling industry was £84 billion. Gross gaming yield was estimated at £9.9 billion, of which, in part reflecting its participation 3 Gambling Commission, British Gambling Prevalence Survey 2007 (London: National Centre for Social Research, 2007), Executive Summary. 120



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figures, a quarter was generated by the National Lottery.4 Most of the remainder was generated by the industries that the Gambling Commission regulates.5 2.3. The Industry Leaving aside the National Lottery, the following are core data (rounded) on the gambling industry in Britain in 2008/09.6 Sector

Premises

Income (£M)

Profit (£M)

Betting (off course) 8,862

10,817 (turnover)

1,717

Bingo

641

1,703 (gross gaming sales)

Casinos

145

4,438 (drop)

Arcades

937

Remote

328 (licences)

Lotteries

542 (licences: all non-commercial)

656 (ggy) 490 (gross profit) 93

These figures must be approached with caution. As is well known it is not possible to compare turnover (in the case of betting) with gross gaming yield (ggy, in the case of casino gaming). Bingo does not generate profits directly from the games played (gross gaming sales) but from other expenditure within the premises, notably on gaming machines, noted in Part 6.1 below. The Commission holds financial data for the major forms of lottery governed by the Act (society and local lotteries), but not for the smaller versions. Nor are there centrally held data on the financial returns for remote gambling.

4 National Lottery Commission, Delivering a new Lottery for the Nation, Annual Report and Accounts 2008/09 (HC 584, 2009). 5 Gambling Commission, Annual Report 2008/09 (HC 701, 2009), p. 9. All references to Gambling Commission publications of whatever sort can be found on its very helpful website; . 6 Gambling Commission, Industry Statistics 2008/09. There are clear signs of economic strain in the industry, some but not all of which is attributable to the recession. See commentary on horseracing and the bookmakers in The Times, 24 July 2009, p. 71; bingo (which has longer-term problems) in The Times, 15 June 2009, p. 39; and on the Gala Coral Group (which manages casinos, bookmaking, bingo and remote gambling) in The Observer, 26 July 2009, Business Section, p. 1. 121

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3. The Regulatory Structure in Outline 3.1. Authorisations and Exceptions The Gambling Commission is responsible for the entire commercial gambling market in Great Britain, but the particular regulatory structure for which it is responsible does not apply to all circumstances in which persons gamble. The manner in which the Act subjects commercial gambling to its control is, in essence, very simple. Its detail, which runs to 362 sections and 17 Schedules, together with the many statutory instruments made by the responsible government department, the Department for Culture, Media and Sport (DCMS), and a growing set of licence conditions and guidance issued by the Commission is massively complex. It must be recognised that this chapter cannot do justice to the regime’s full complexity and subtleties.7 First, s. 33 provides that it is an offence to provide ‘facilities for gambling’ as defined in s. 5,8 unless the Act authorises their provision or makes a specific exception in respect of them.9 ‘Facilities for gambling’ include facilities provided both remotely, for example by the internet, or non-remotely, that is in ‘bricks and mortar’ venues. For the purpose of s. 33 authorisation exists where the Gambling Commission has issued operating and personal licences in respect of the facilities that are to be provided. At the risk of over-simplification, the exceptions cover, first, the provision of a range of private and non-commercial betting and gaming facilities. These are either subject to no regulatory control or only to notification requirements to the licensing authority, provided that the gambling complies with a lengthy set of conditions. These, inter alia, prohibit private gain or require the gaming to be equal chance or to be conducted in a club which is established and conducted wholly or mainly for purposes other than gambling. Typical examples are members’ and other kinds of social clubs.10 Some of these exceptions, such as gaming

7 The leading exposition of the law in Great Britain is Monkcom, S. and contributors, Smith and Monkcom: The Law of Gambling (3rd edn, London: Tottel Publishing, 2009) (hereafter Smith and Monkcom). This book is more than 1,300 pages in length. 8 In summary, a person provides facilities for gambling who provides, operates or administers arrangements for gambling, participates in those arrangements or invites others to gamble in accordance with them. 9 Sections 34 and 35 provide that section 33(1) does not apply to the provision of facilities for a lottery or to making a gaming machine available for use. Authorisation for their provision is contained on Parts 11 and 10 of the Act respectively. 10 Parts 12, 13 and 14 and Schedules 14 and 15. A practitioner with considerable experience in this area has observed ‘so many of them apply to the most numerous forms of establishment providing gambling – pubs and clubs – that the practical law of gambling in Great Britain may properly be understood as a law of exemptions.’ Kolvin, P., (ed.), 122



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in a public house or at a travelling fair are long-standing, reflecting the place of gambling as a traditional social pastime.11 There is, secondly, the provision of a range of small-scale commercial gambling facilities that fall outside the regulatory structure but may be lawfully conducted where they comply with the Act’s requirements.12 Presenting no challenge to the licensing objectives, a long-standing example is ‘prize gaming’, a characteristic of bingo halls, amusement arcades, seaside resorts and fairs. This is gaming in which the prizes, which may be money, goods or services, are fixed before the gaming begins and do not depend on the number of persons playing or the amount paid to play.13 Secondly, s. 37 provides that premises cannot be used to operate a casino, provide facilities for bingo, make a gaming machine available for use or provide facilities for other forms of gaming or for betting unless the licensing authority has issued a premises licence in respect of them. Whereas s. 33 deals with the provision of any gambling facilities, the prohibition in s. 37 is limited to premises used for the provision of non-remote gambling facilities. In other words, an operator located in Great Britain who seeks only to provide facilities for remote gambling requires only the Gambling Commission’s authorisation.14 The operator who also seeks to provide them non-remotely requires in addition the licensing authority’s permission. Operating, personal and premises licences comprise the centrepiece of the Gambling Act’s regulatory structure. In these respects the 2005 Act is comprehensive of the commercial gambling market. In addition to the regulation of casinos, bingo, lotteries and gaming machines that existed prior to its enactment, the new regime covers, for the first time, betting, remote gambling and arcades.

Gambling for Local Authorities: Licensing, Planning and Regeneration (London: The Institute of Licensing, 2007), chapter 9.25. 11 On the social and legal history of gambling see Miers, D., Regulating Commercial Gambling (Oxford: Oxford University Press, 2004), Part I. 12 The Act also maintained the range of non-commercial lotteries established under the old law. To these it added a small commercial form, the ‘customer lottery’, which permits a business to promote small lotteries (maximum prize £50) on its premises. See section 252 and Schedule 11. 13 On prize gaming in premises licensed for bingo see note 71 below. Urban and seaside amusement arcades are now either adult gaming or family entertainment centres. Where they offer prize gaming their stakes and prizes are governed by the Gambling Act 2005 (Limits on Prize Gaming) Regulations 2009, SI 2009 / 1272. This limits the stake to £1 a game and to £500 for the aggregate of all stakes in any one game; the prize is £70 for any one game. 14 It is sufficient for the application of section 33 that there is at least one piece of remote gambling equipment used in the provision of these facilities located in Great Britain. Whether other aspects of the provision are conducted within or without the United Kingdom is irrelevant; see section 36. 123

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It may be observed that far from being largely deregulatory in its intentions, as many consider it to be, the Gambling Act subjects betting to significantly more extensive regulation than was the case under the repealed legislation.15 I shall say something about each of the three licences and give some examples of how the Commission has sought to implement them. 3.2. The Operating Licence 3.2.1. Types of Operating Licence Part 5 of the Act requires any operator to hold one (or more, depending on the facilities to be provided) of the ten different kinds of operating licences specified in the Act.16 These cover the range of gambling facilities permitted by the Act, as well as authorising persons to manufacture or supply the software for gaming machines.17 They are: a) a casino operating licence; b) a bingo operating licence;

c) a general betting operating licence;

d) a pool betting operating licence;

e) a betting intermediary operating licence;



f) a gaming machine general operating licence for an adult gaming centre;

g) a gaming machine general operating licence for a family entertainment centre; h) a gaming machine technical licence;

i) a gambling software operating licence; and



j) a lottery operating licence.

These licences all refer to the provision of gambling facilities in ‘bricks and mortar’ premises. In respect of eight of them it is, additionally, possible to hold a ‘remote

15 By 31 March 2009 1,564 betting licences had been issued; a third of the total (4,166) of all operating licences. 16 Section 65. Section 68 permits the Commission to issue a combined licence, for example to a company that operates both family entertainment and adult gaming centres. See generally Smith and Monkcom, chapter 6. 17 The operating licence is the development of the certificate of consent that the Gaming Act 1968 required persons who operated bingo and casino premises to hold. 124



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operating licence’.18 This authorises activity to be carried on either in respect of remote gambling or by remote communication, discussed in Part 5 below. One operator may hold both a remote licence and a non-remote licence. For example, a bookmaker that operates both on the high street and on the internet would be required to hold two separate ‘general betting operating licences’, each authorising one of these activities.19 Taking into account all the permutations of remote, non-remote, ancillary and restricted licences that have been introduced by the regulations concerning fees, there were, just before the Act came fully into force on 1 September 2007, some 35 varieties of operating licence. 3.2.2. Determining Applications for an Operating Licence In considering an application for an operating licence the Commission must have regard to three matters.20 The first of these comprise the licensing objectives set out in s. 1 of the Act: (i) preventing gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime; (ii) ensuring that gambling is conducted in a fair and open way; and (iii) protecting children and other vulnerable persons from being harmed or exploited by gambling. I shall have more to say about these in due course. They are relevant here because the application must demonstrate, for example, that the casino has robust procedures to prevent money laundering, the betting shop has published payout rules on ‘breakages’, or that the family entertainment centre does not provide improper inducements to children. Secondly, the Commission must form an opinion of applicant’s suitability to carry on the licensed activities. This opinion is a central element of the quality controls that comprise the Act’s regulatory structure, and is informed by evidence

18 As the licences defined by section 65(f) and (g) are by definition land-based operations it does not appear to be possible for an operator to hold both a non-remote and a remote operating licence for an adult gaming centre or for a family entertainment centre. 19 It is not possible to combine these two into a single licence authorising both the remote and the non-remote provision of the specified gambling facilities (s. 67(2)). The Commission has to some extent mitigated the effect of this provision by developing the notion of the ‘ancillary remote operating licence’ provided for in regulations 2 and 14 of the Gambling (Operating licence and Single-Machine Permit Fees) Regulations 2006, SI 2006 / 3284. 20 The Commission’s broad expectations of applicants for licences are set out in its Statement of principles for licensing and regulation (September 2009), para. 2.3. 125

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supplied by a wide range of other law enforcement and regulatory agencies.21 The criteria of suitability are the applicant’s integrity, competence and financial circumstances. These apply with equal force to any person ‘relevant’ to the application, in particular, someone who ‘is likely to exercise a function in connection with, or have an interest in, the licensed activities.’ There will be some persons whose functional relevance to the application will be obvious; for example, the directors of the company that is to hold the licence and anyone who has some responsibility for ensuring compliance with its terms and conditions. Thirdly, and reflecting the increased awareness of their impact on the player, the Commission must consider the suitability of any gaming machine to be used on the premises. I will return to this later. One final point to note is that even if the application meets the requirements set out in s. 70(1), the Commission may still refuse it where the applicant has a conviction for a ‘relevant offence’ or because a ‘relevant person’ has such a conviction. This has been a very brief summary of a complex procedure.22 The Commission came into being in October 2005 faced with the massive task of determining the applications made under and required by the Act. By 31 March 2009 the total of operating licences was 4,166.23 3.2.3. Licence Conditions Having decided to grant an operating licence, the Act makes extensive provision for the Commission to attach conditions to it. This, too, is a substantial matter. In essence, the Commission may restrict the activities which may be carried on in reliance on the licence or otherwise provide for the manner of their exercise. Some of these are of general application and are published in the Commission’s Licence Conditions and Code of Practice (LCCP (2008) as amended).24 A substantial revision came into force on 1 January 2009, but it is a dynamic text. For example, shortly after statutory increases in the maximum permissible proceeds for a ‘large society lottery’ it became necessary to amend the relevant LCCP condition.25

21 See section 3 of the Commission’s Licensing, compliance and enforcement policy statement (September 2009), para. 2.6, and which generally gives a fuller explanation of the licensing process. 22 Smith and Monkcom, chapter 6, paras. 6.27–6.87. 23 Gambling Commission, Annual Report 2008/09, supra note 5, p. 15. 24 General conditions are imposed under section 75; section 76 establishes substantial consultation procedures. 25 The existing limit of £2 million was a mandatory condition of a lottery operating licence (s. 99(3)(a)); the increase to £4 million thus required an amendment by order; Gambling Act (Variation of Money Limits) Order 2009, SI 2009 / 20. As the prize limit is expressed as a percentage of the proceeds, this change necessarily increased that limit in any case to a maximum of £400,000. Normally the Commission waits three months to give notice 126



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Similarly, revised conditions concerning the casino reserve came into force on 1 July 2009.26 Other conditions apply to particular kinds of licence;27 and by s. 77 the Commission can apply conditions to individual licences. The Commission has extensive enforcement powers to ensure operators’ compliance with these conditions. The least onerous is a warning; thereafter they contemplate a ladder of increasing severity concerning the operating licence – from an additional condition to revocation – and an unlimited financial penalty.28 A key element in the Commission’s regulatory armoury are the social responsibility provisions of the code of practice that s. 24 require it to issue in respect of a licence holder’s arrangements for meeting the three licensing objectives. These social responsibility provisions are licence conditions which automatically attach to any operating licence. And unlike the other code of practice provisions, breach of which may occasion a regulatory response, non-compliance with these conditions is a criminal offence. These provisions thus constitute a central aspect of the Commission’s social responsibility agenda. 3.3. The Personal Licence The second element in the regulatory triumvirate is the personal licence, governed by Part 6 of the Act. The Commission grants or rejects applications for personal licences on the basis of the provisions of Part 5, modified to apply to their particular requirements. Thus all of the criteria just outlined that refer to a person’s suitability to hold an operating licence apply equally to personal licences. I will not dwell on these requirements save to emphasise their importance as a quality control on those who are to perform either management or functional roles in respect of the operating licence.29 The Act requires as a condition of an operating licence that there be at least one person who holds a personal

of variations in licence conditions. It considered that this change required immediate notification; LCCP 2008, Supplement 5: Revision to licence condition 11 concerning lotteries (February 2009). See generally Smith and Monkcom, chapter 15, paras. 15.193–15.194. 26 LCCP 2008, Supplement 6: Casino gaming reserve (June 2009). 27 Sections 89–99. Just prior to the full commencement of the Act the Commission published illustrative examples of conditions by sector. By section 78 the Secretary of State may provide for conditions to attach to licences of a specified description. 28 Details are published on the Commission’s website, together with a register of regulatory decisions. See generally Smith and Monkcom, chapter 6, paras. 6.180–6.209. 29 The personal licence is the development of the certificate of approval that the Gaming Act 1968 required persons employed in the bingo and casino industries to hold. Certificates of approval held under the 1968 Act were ‘grandfathered’ into the new regime, but from 1 January holders will require an appropriate personal licence. 127

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licence in respect of a ‘specified management office’ (a personal management licence (PML)). In addition, it permits the Commission to require that those who perform ‘operational functions’ should also hold a personal licence (a personal functional licence (PFL)). These conditions are amplified in the LCCP 2008, which specifies that anyone performing a function regarding for example the overall management and direction of the licensee’s business or affairs, or who is the head of any finance or regulatory compliance function, will require a personal licence. LCCP 2008 also makes provision for personal licences to be held in respect of operational functions performed in respect of a casino operating licence; for example dealers in respect of casino games, cashiers, and any supervisor of gaming activities.30 3.4. The Premises Licence The final element is the premises licence. This authorises premises to be used for the provision of one of five kinds of gambling facilities. In short, these are: a) the operation of a casino b) the provision of facilities for he playing of bingo

c) making category B gaming machines available for use

d) making category C gaming machines available for use, and

e) the provision of facilities for betting.31

Maintaining the central-local division of function that was a feature of the Gaming Act 1968 premises licences are issued not by the Gambling Commission but by local licensing authorities. Licensing authorities share with the Commission a number of responsibilities that give effect to the radical shift in the ethos underlying the 2005 Act. This is that commercial gambling is a leisure good for which operators, persons and premises may be licensed where the provision of gambling facilities is ‘reasonably consistent with pursuit of the licensing objectives.’ I emphasise that this ‘aim’ is, as the Act puts it, a statutory duty upon both the Commission and the licensing authority.32 In discharging this duty neither the Commission nor a licensing authority may take account of the existence or otherwise of any demand for the facilities to be provided.33 30 LCCP 2008 Part I, Personal Licence Conditions. See Smith and Monkcom, chapter 6, paras. 6.102–6.108A, and chapter 7. 31 The matter is of course much more complex than this. See Part 8 of the Act and Smith and Monkcom, chapters 9–11. 32 Sections 22(b) and 153(1)(b) respectively. 33 Sections 72(a) and 153(2)) respectively. Under section 166 a licensing authority may resolve not to issue casino premises licences. But if it does not so resolve it cannot use (as 128



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Nor may they impose any condition on the licence requiring the facilities to be restricted to membership of a club or other body.34 Again like the Commission, licensing authorities were required to issue a statement of their licensing principles before they exercised any functions under the Act.35 The point to note here is the principles that underlie current conceptions of good regulation, which particularly include clarity and transparency in regulatory practice. Failure to meet the legitimate expectations that these statements encourage means in the case of the Commission an appeal to the Gambling Appeals Tribunal, and in the case of licensing authorities appeals heard by the normal domestic courts.36 In addition to being required to have regard to their statement of principles, s. 153 requires licensing authorities to take account of any code of practice or any guidance issued by the Commission under ss. 24 or 25. Issued under s. 25, the Commission’s Guidance to Local Authorities, now in its amended third edition, is a key reference point for licensing authorities. It is a substantial document with too much detail to be explored here, but one example may be given. During early 2008 it became clear that a number of applicants were applying for premises licences for one kind of gambling facilities in respect of which they had an operating licence, but were in fact proposing to split the premises so as to give greater prominence to another permitted form.37 The Commission took the view that this was inconsistent with the purpose of the Act, and following a consultation added a new condition to any operating licence to ensure that there is an appropriate balance of activities on the premises and that the activities offered correspond to the licence type.38 Licensing authorities are required to take account of this condition when issuing premises licences.

was the law under the 1968 Act) the absence of demand as a basis for refusing a licence. 34 Sections 87(b) and 170 respectively. 35 Section 349; the statement must be renewed every three years. 36 Part 7 and sections 206–209 respectively. Judicial review would also lie for breaches of procedural justice. 37 ‘Premises’ is widely defined by section 353(1) to include any place, and includes any vessel and vehicle. The ‘split premises’ in question were those on which B3A machines were situated but which for which the licence indicated that B2 machines, which have higher stake and prize limits, could to be used; see Parts 6.3.2.2 and 6.3.2.3 below. 38 See Gambling Commission, Annual Report 2008/09, supra note 5, p. 21. The change also includes a new ordinary code provision; LCCP 2008, Supplement 4 (January 2009): Primary Gambling Activity. 129

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4. The Gambling Commission 4.1. The Commission’s Core Responsibilities Established by Part 2 of the 2005 Act, the introduction of this ‘unified regulator’ addressed one of the main weaknesses of the repealed law: the fragmentation of enforcement responsibility across a range of agencies. Paraphrasing s. 22 of the Act, the Commission must, in carrying out its functions, aim, first, to pursue and, wherever appropriate, have regard to the licensing objectives. Secondly, and as we have noted, it must aim to permit gambling in so far as it thinks that such permission is reasonably consistent with the pursuit of those objectives.39 Regulatory agencies in Great Britain are in general subject to a range of requirements that relate to their own governance and regulatory practices. Known as the ‘better regulation’ agenda, these requirements have been led by the government department responsible for business and its regulation and are principally to be found in two key documents. The Hampton principles require regulatory bodies to adopt practices that are proportionate, accountable, consistent, transparent and targeted.40 The Macrory principles are directed at regulatory penalties. They should aim to change the behaviour of the offender, eliminate any financial gain or benefit from non-compliance, restore the harm caused by regulatory non-compliance, and deter future non-compliance where appropriate. They should be responsive and consider what is appropriate for the particular offender and regulatory issue, and be proportionate to the nature of the offence and the harm caused.41 As we have noted, the Commission is additionally subject to its own statutory requirements. Section 23 requires it to prepare and publish a ‘statement of principles for licensing and regulation’, which it must keep under review ‘from time to time’. This must also contain an explanation of how the principles will assist the Commission’s pursuit of the licensing objectives and specify the principles that will apply to its consideration and management of applications for operating licences.42 But the content of its Statement of Principles for Licensing and Regulation, first published in December 2006 and revised in September 2009 (hereafter, Principles (2009)), is not entirely a matter for the Commission, which is required to consult a range of named stakeholders. The Commission’s further obligation to prepare a statement setting out the principles it will apply when

39 Gambling Act 2005, Explanatory Notes, para. 94. 40 Hampton, P., Reducing Administrative Burdens: Effective Inspection and Enforcement (HM Treasury, March 2005). 41 Macrory, R., Regulatory Justice: Making Sanctions Effective (Better Regulation Executive, Cabinet Office, November 2006). 42 Sections 23(2), 70(4) and 73(4). 130



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exercising its powers to impose a financial penalty on a licensed operator was published in June 2007 and revised in September 2009.43 Principles (2009), along with the revision of its Licensing, compliance and enforcement policy statement (September 2009) (hereafter, Licensing (2009)), was in part the Commission’s response to a ‘Hampton review’ for which it volunteered in 2008.44 This review commended the Commission’s initial performance of its regulatory functions; among its recommendations were a sharper risk analysis and clearer advice to licence holders and others who may have to engage with the Act’s requirements.45 On this the Commission has, since it came into being, adopted a direct and proactive approach with the industry in line with the commitments to openness and accountability set out in its Corporate Governance Framework.46 In respect of many aspects of the Act the Commission is obliged to consult operators and others it thinks appropriate. But it has also taken a number of initiatives designed to engage the industry, to assist its understanding of the new regulatory regime, and to encourage it to discuss its concerns before entrenched positions on the implementation of the Act are assumed. 47 4.2. The Hierarchy of Regulatory Control The Act’s regulation of the commercial gambling market may be seen as a hierarchy of control. At the apex is DCMS, which sets the government’s policy

43 Section 121(7). The Commission’s Statement of principles for determining financial penalties (September 2009) sets out its general criteria for aggravating and mitigating factors and more specific criteria for fixing the quantum of a penalty. 44 Gambling Commission: A Hampton Implementation Review Report (Better Regulation Executive and National Audit Office, April 2009); Gambling Commission, Annual Report 2008/09, supra note 5, pp. 14–15, and Principles (2009), para. 1.4. 45 Educating the public and responding to questions about the Act’s application are regular aspects of the Commission’s work. One of the most difficult areas is the law governing small-scale lotteries. They are widely used by schools, clubs, societies and local authorities as a regular means of raising income for their purposes. In order to assist the larger organisations the Commission published its online guide Lotteries and the Law. One of the areas where the law is difficult lies in the boundary between prize competitions, which are lawful, and lotteries, which are unlawful unless promoted in accordance with the Act. During 2009 a number of house-owners who had been unsuccessful in selling their houses promoted them as ‘prizes’ in a competition. The question was whether these reverse auctions were genuine prize competitions or unlawful lotteries. The Commission has repeatedly advised against such arrangements and in December 2009 issued updated advice. See also Gambling Commission, Annual Report 2008/09, supra note 5, p. 20. 46 Gambling Commission, Annual Report 2008/09, supra note 5, p. 11. 47 Gambling Commission, Annual Report 2007/08 (July 2008, HC 726), p. 6. More generally, the Commission’s regularly website and monthly bulletins provide a constant stream of updates and information. 131

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on gambling. This includes such broad questions as what counts as gaming, a lottery or as remote gambling, what kinds of ‘gambling activity’ should fall within the Act and whether there should be any more casinos other than those that were licensed under the Gaming Act 1968. The Secretary of State has power under the Act to specify by regulation or by order a wide range of definitional and operational matters. The Commission’s primary duties concern the formulation, setting and enforcement of the conditions under which authorised gambling may be carried on.48 It performs these functions, as we have seen, through its procedures for granting and attaching conditions to operating and personal licences, publishing codes of practice and advising local authorities on the grant of premises licences. A very simple depiction of this hierarchy is: – The Act: primary legislation that establishes the regulatory structure, the Gambling Commission, and gives power to DCMS to amend, remove or add to the principal categories of regulatory control;

– Regulations: secondary legislation authorised by the Act and made by DCMS to give effect to those categories; a licensee’s failure to comply may amount to a criminal offence, and may prompt a regulatory sanction;



– Licence conditions made by DCMS under s. 78: these conditions attach to specified operating licences; non-compliance is a criminal offence and may prompt a regulatory sanction;



– General and individual licence conditions made by the Commission under ss. 75 and 77: these conditions attach to specified operating licences; noncompliance is a criminal offence and may prompt a regulatory sanction;



– Code of Practice social responsibility provisions made by the Commission under s. 24: these conditions automatically attach as conditions of an operating licence; non-compliance is a criminal offence and may prompt a regulatory sanction;49

48 By section 26 the Commission is required to advise to the government about the incidence, effects, regulation and ‘the manner in which gambling is carried on’. 49 This liability arises in a somewhat roundabout manner. Section 24(2) provides that a code shall describe arrangements whereby an operator will achieve three purposes. The first two of these purposes are also two of the Act’s three licensing objectives (s. 1(b) and (c)). By section 82 an operating licence shall be subject to the condition that the licensee ensures compliance with any social responsibility code issued under section 24(2). The final element is provided by section 33. This specifies general offences relating to the provision of facilities for gambling. A person who provides such facilities commits an offence unless he is exempt or holds an operating licence in respect of the relevant activity. But the activity must also be carried on in accordance with the licence conditions, which, as we have seen, include the provision of any social responsibility code of practice. 132



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– Conditions applied by a licensing authority to the issue of a premises licence: non-compliance is a criminal offence and may prompt a regulatory sanction;50



– Code of Practice ordinary provisions made by the Commission under s. 24: these conditions attach to any operating licence to which they refer; non-compliance may prompt a regulatory sanction



– Advice: made by the Commission, departure from which attracts no regulatory sanction of itself.

4.3. The Commission’s Approach to Regulation, Compliance and Enforcement Since it came into operation the Commission has changed the emphasis of its approach to regulation, compliance and enforcement from ‘setting policy and licensing the gambling industry … to providing cost effective regulation under the 2005 Act.’51 Too lengthy to examine in detail here, its core methodology is set out in its statement Licensing (2009) and reflects the risk assessment approach adopted by other regulatory agencies in Great Britain. Risks to the licensing objectives are assessed by reference to three ‘regulatory risk groups’: the operator, the facilities, and the manner of their provision. Routine or riskprompted compliance visits aim to identify and assess current and future risks.52 That assessment is in essence a matrix in which the size, scale and nature of the operator’s licensed activity are judged in terms of their impact.53 These factors are especially important both where an operator’s licensed activities extend across more than one sector; for example, betting and casinos, and where a single licensed activity extends across multiple sectors; for example gaming machine manufacture. From the outset the Commission adopted a direct and proactive approach to engage the industry in the regulatory tasks that the Act requires. That approach continues. It is particularly well illustrated by the procedures the Commission has adopted for risk-profiling operators. These profiles (low to high risk) are employed in the Commission’s compliance reviews, which are correspondingly more or less intensive. A key point here is the Commission’s concept of ‘earned autonomy’. ‘The more effort an operator makes and the more compliant they are the less rigorous and frequent regulatory compliance attention they will

50 An operator who does not comply with a premises licence condition, for example as to door supervision (s. 178) uses those premises in a way that is unauthorised (s. 37(2)). 51 Gambling Commission, Annual Report 2008/09, supra note 5, p. 13. 52 Licensing (2009), section 2, paras. 2.4–2.13. 53 Licensing (2009), section 2, para. 2.6. 133

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experience.’54 Those who experience the impact of the regulatory sanctions at its disposal are publicly listed on its Licensing and Regulatory Decisions, but the Commission’s approach is to work constructively with licence holders and with minimal recourse to its enforcement powers. Taken as a whole, this approach aims to give effect to the Commission’s objective of ‘delivering a proportionate, risk-based approach to regulation.’55

5. Remote Gambling The regulation of remote gambling is a chapter in itself, but given its importance across the European Union this Part summarises the British approach. It is worth noting at the outset some definitional matters. By s. 6 of the 2005 Act ‘gambling’ means gaming, betting, or participating in a lottery.56 ‘Remote gambling’ means ‘gambling in which persons participate by the use of remote communication.’ Section 4 goes on to provide that ‘remote communication’ means communication using any kind of electronic or other technology for facilitating communication.’ The Act thus contemplates two very different forms of remote gambling. The phrase can be used, first, to describe gambling transactions conducted on line where the outcome of the gamble is determined by an event external to the internet (a horserace or a football match). Here the internet transaction serves the same function as a bet placed by any other ‘remote’ means of communication (the phone, FAX, etc). This has long been lawful in Great Britain and is also lawful when conducted in respect of bets on the National Lottery. But it was never possible to engage in remote gaming, as the Gaming Act 1968 required the player to be present at the place where the gaming took place. ‘Remote gambling’ can be used, secondly, to describe gambling transactions conducted on line where the outcome of the gamble is determined by an event internal to the internet (‘virtual’ gaming etc). This is the kind of remote gambling that is supplied from many non-EU jurisdictions, and which raises serious questions about consumer protection, children’s access, fraud etc. It was in respect of this kind of uncontrolled and uncontrollable remote gambling that the British government concluded that a better approach was to create a regulatory fold in which remote operators would seek to operate within a

54 See the Commission’s Information paper, The Compliance Process, The Risk Modelling System (RMS) and the Annual Visit Programme (APV) (August 2007), para. 1.18. Its attached Evaluation Guides for compliance visits show the matrix approach. 55 Gambling Commission, Annual Report 2008/09, supra note 5, pp. 4, 13 and 16. 56 One of the Act’s achievements is for the first time to define all of the elements that comprise ‘gambling’; sections 6–15. 134



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regulatory framework that would reassure players. But the Act was silent on the key question of taxation. The question for remote gambling operators was whether the apparent incentive of being regulated outweighed the regulatory costs and an adverse tax environment. The evidence suggests that it did not.57 In reality there is nothing to prevent a non-EU operator from providing remote gambling facilities to UK based players. But a person located in Great Britain who advertises ‘foreign gambling’ there commits an offence unless the arrangements for that gambling take place in an EEA State.58 Consistent with its policy of encouraging operators to subject themselves to the Act’s regulatory regime, Britain has adopted the country of origin approach to other Member States’ regulatory arrangements. This is well illustrated by the Act’s provisions concerning the regulation of advertising. In short, regulations made in Great Britain as to the form, content, timing and location of any advertisements do not apply to EEA States, who are free to advertise within the UK.59 As is the case with the ‘white list’ of non-EEA States,60 the Act does not seek to duplicate the regulatory requirements where the advertising is already properly regulated.

57 ‘It may be that such reluctance accounts for the remarkable fact that GA 2005, s 89(2) was repealed (with s 89(3)) before ever coming into effect’. Smith and Monkcom, chapter 17, para. 17.3, n 1. 58 Gambling Act (Advertising of Foreign Gambling) Regulations 2007, SI 2007 / 2329 came into force on 1 September 2007, the date on which all remaining sections of the Act came into force. ‘Foreign gambling’ is any non-remote gambling conducted in a non-EEA country or any remote gambling that is not subject to the law of an EEA country. Section 331 does not apply to lotteries, which are subject to a separate regime (Part 11). By section 331(3) Gibraltar is treated as if it were an EEA State, which is a reason why some major British bookmakers have located the ‘remote’ aspects of their business there. Section 331(4) permits the Secretary of State to specify other countries or places to be treated as EEA States. The DCMS ‘white list’ is stated on the Commission website. The Commission regards UK based operators who advertise prizes to be claimed in a non-EEA or non-white listed place (e.g. Las Vegas) or country as committing an offence under section 331. 59 The Secretary of State may make regulations concerning any advertising in the United Kingdom (s. 328). Advertising that is broadcast by television or is an information society service within Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market, [2000] OJ L 178 is subject to this regulation in two instances. These are where the broadcaster is subject to the jurisdiction of the United Kingdom for the purposes of Directive 2007/65/EC amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities [2007] OJ L 332/27 or is not subject to the jurisdiction of an EEA State (s. 333(6)). 60 Gambling Commission, Annual Report 2008/09, supra note 5, p. 17. 135

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A Member State’s provision of cross-border remote and non-remote gambling facilities within the EU remains, of course, a controversial and an essentially unresolved matter. Member States generally do not welcome British operators’ efforts to provide their (well-regulated) betting services to their citizens, as the sequence of Court of Justice decisions from Gambelli to the Betfair case illustrate.61 Conversely, the British government has become concerned that gambling operators located in the EU and elsewhere who target British gamblers do not necessarily work to the same regulatory standards as those required under the 2005 Act. For this reason DCMS has initiated a consultation with a view to requiring all such operators to be licensed by the Commission. This is a major undertaking, not least in amending the Act so as to bring these operators within the jurisdiction, and in their taxation. The intention is also to create ‘a more level playing field to compete with overseas rivals.’62 On the domestic front, as noted earlier, an operator who wishes to provide gambling facilities both non-remotely and remotely will require an operating licence in respect of each.63 The Act permits the Commission to provide for the establishment, testing and enforcement of a range of standards for a remote gambling operating licence. For example, s. 89(4)(a)) permits it to set standards for ‘a system used for the generation of results in a virtual game, virtual race or other virtual event or process used in the course of remote gambling.’64 These standards may additionally be attached under the Commission’s powers to add general or individual conditions to the operating licence (LCCP 2008). Despite the adverse publicity, remote gambling attracts few players, at least by comparison with participation in the National Lottery and the traditional non-remote activities.65 The Commission’s regular research data on remote

61 Case C-243/01, Procuratore della Repubblica v. Piergiorgio Gambelli, [2003] ECR I-13031; Joined Cases C-203/08 and C-258/08, The Sporting Exchange Ltd, trading as Betfair v. Minister van Justitie. On the Betfair case see Arnull, A., ‘Gambling with competition in Europe’s Internal Market’, European Competition Law Review, 30/9) (2009), 440–446. More generally see Miers, D., ‘A British view of European gambling regulation’, in Littler, A., and Fijnaut, C., (eds.), European and National Perspectives of the Regulation of Gambling (Leiden: Martinus Nijhoff, 2006), pp. 81–126. 62 A fair deal for British gambling operators – creating a more level playing field to compete with overseas rivals; . See the Minister’s statement at . 63 Remote operating licences are also required both for persons who manufacture, supply, install or adapt gambling software and who manufacture, supply, install, maintain or repair a gaming machine where the gambling activity is carried on by remote communication; sections 41, 67(1)(b) and 243. 64 Gambling Commission, Remote gambling and software technical standards (RTS). 65 The 2007 Prevalence Survey found that only 3% of respondents had gambled on line (virtual poker and casino games) and 4% had used the internet to place bets with a 136



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gambling participation showed in June 2009 that around 5% of 8,000 respondents gambled on line, both as virtual gaming and placing bets. A further 5% gambled on the online National Lottery games.66 The Commission has published a leaflet giving guidance to players on ‘what to look for when gambling online’, advising that different sites offer different levels of consumer protection.67

6. Gaming Machines 6.1. Introduction A machine that is ‘designed or adapted for use by individuals to gamble (whether or not it can be used for other purposes’ is a ‘gaming machine’ for the purpose of the Gambling Act 2005.68 Ever since their appearance in Great Britain in the early years of the 20th century as a development of the mechanical vending machine, gaming machines have generated a constant concern about their impact on the player, in particular on children.69 I do not rehearse that history, though as discussed below the concern remains high on the Gambling Commission’s policy agenda. An additional reason is that as the income generated by machines remains a major element of the balance sheets in particular for bingo and betting shops,70 operators have every incentive to maximise their

bookmaker. Gambling Commission, British Gambling Prevalence Survey 2007, supra note 3, Executive Summary. 66 Gambling Commission, Survey data on remote gambling participation; year to June 2009. 67 Operators who are members of the Remote Gambling Association subscribe to a set of social responsibility standards; see . During 2009 the Commission conducted ‘mystery shopper’ exercises on both licensed and unlicensed remote gambling websites to test controls on under age gambling. It found that 95% of active (3.2 million) customers were registered with operators who had no significant weaknesses. But the smaller and less well established sites are likely to have weaknesses. See Gambling Commission, Annual Report 2008/09, supra note 5, p. 18. 68 Section 235(1). The general definition is wide and could catch many ‘machines’ including for example a home computer or a computer in a cyber café. Section 235(2) and (3) contain extensive provisions concerning machines that do not fall within, and that amplify, the simple definition: ‘domestic’ and ‘dual use’ computers do not fall within the definition. ‘Dual use’ computers are excluded where they are not presented (in the cyber cafe, for example) ‘in such a way as to facilitate, or to draw attention to the possibility of, its use for gambling’. ‘Domestic’ computers are computers located in a private dwelling and used on a domestic occasion’, a definition that also applies to telephones and televisions. Gambling Act 2005 (Gaming Machine) (Definitions) Regulations 2007, SI 2007 / 2082. 69 On the history see Miers, supra note 11, chapter 4. 70 Gross profit for the off-course betting industry in 2008/09 from bets was £1,717 million; gross profit from machines was £1,138 million; gross gaming sales for the bingo industry 137

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opportunities to install machines. This is especially so with cash bingo in which, like a lottery, the players’ stakes are accumulated to provide the cash prize.71 As was the case under the old law, it is in the matter of gaming machine control that the regulator has been substantially engaged. The regulatory structure that was in place under the Gaming Act 1968 was largely successful in controlling the manufacture, supply, location and use of machines. But it was not always possible to define with legal precision the difference between ‘gaming’ and ‘betting’ for the purpose of regulatory control. The betting industry exploited this uncertainty in respect of the installation in betting shops of Fixed Odds Betting Terminals (FOBTs). The history of the dispute as to whether FOBTs were indeed betting or were gaming machines, in which case they fell under the control of the 1968 Act, is too lengthy to rehearse. The difficulty is now removed, as a ‘gaming machine’ is defined as a machine that enables a person to gamble, and ‘gamble’ includes betting, gaming or participation in a lottery.72 But as the more recent history of the ‘primary gambling activity’ issue illustrates, the matter of gaming machine control remains live. It is worth noting in passing that the boundary issues concerning the legal designation of FOBTs arose in part because the non-legal definitions of ‘gaming’ and ‘betting’ are not mutually exclusive. When I play roulette, I am gaming because I am playing a game for value (typically money) that involves an element of chance, but I can equally be described as betting on a given number.73

in 2008/09 was £1,717 million; gross profit from machines was £214 million. Gambling Commission, Industry Statistics 2008/09, pp. 5–6. 71 Bingo has two traditional formats: cash and prize bingo, though for regulatory purposes the Act treats them both as ‘prize gaming’. They are both equal chance gaming and they both continue to offer modest stake and prize levels, albeit these were recently increased. The levels in premises in respect of which a bingo operating licence is in force are governed by the Gambling Act 2005 (Operating Licence Conditions) Regulations 2007, SI 2007 / 2256, as amended by the draft Gambling Act 2005 (Operating Licence Conditions) (Amendment) Regulations 2010. The stake is now £1, and where the prize is cash it is £100 if no-one under the age of 18 are permitted on the premises when the game is being played, or £70 if someone is. 72 A lottery ticket dispensing machine is not a gaming machine provided that the machine does not determine the result of the lottery (s. 235(d)). Neither must it display the result save after any period of time specified by regulation; this has been set at one hour. Gambling (Lottery Machine Interval) Order 2007, SI 2007 / 2495. 73 Historically ‘gaming’ has required the bettor to participate in a game of chance or skill, or chance and skill combined. A person who bets on a roulette player winning on the next spin of the wheel is not ‘gaming’ because she is not participating. A person may bet on the outcome of a tennis match, as may the players (though this would be against the rules), but we would be unlikely to say that the players are ‘gaming’ even if they are playing a game. This is because even if there is some element of chance in tennis it remains a game of skill. But some ‘gaming’ games involve no element of skill at all. 138



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It is because bankers’ games can both legitimately and illegitimately exploit the player that the government’s policy since 1968 has been to regulate these betting activities more closely than others. Roulette and other casino games were designated ‘gaming’; so defined they could be subject to discrete and rigorous regulation. The same process can be seen with bingo. Its structural characteristics define bingo both as a lottery and as a game: the chance distribution of prizes to persons who pay to participate. Unlike casino games, bingo is equal chance gaming,74 but it was nevertheless classed as gaming and subjected to the same regime as regulated casinos.75 6.2. The Regulatory Regime for Gaming Machines As we have seen, the Act proceeds by making the provision of gambling facilities unlawful unless that provision is authorised either by an operating licence or by an exception in the Act. The same equation applies to gaming machines.76 The regulatory trigger for gaming machines is s. 242. This makes it an offence to ‘make a gaming machine available for use’ unless there is an operating licence in respect of its use or its use is authorised by an exception.77 It may be noted

Betting may or may not involve the exercise of skill, but a lottery is only and always a ‘game’ of chance. On the definitional history see Miers, supra note 11, chapter 1.2; on the current legal definitions, Smith and Monkcom, chapter 2. The same boundary issue arises with remote betting and gaming; see Gambling Commission, Is a product remote betting or remote gambling? (October 2009). 74 A common social pastime is equal chance gaming in public houses. This is regulated under Part 12, s. 279 of which provides that such gaming is exempt provided that it complies with regulations prescribing the amounts of stakes and prizes. Gambling Act 2005 (Non-Commercial Equal Chance Gaming) Regulations 2007, SI 2007 / 2041. Illegal poker games were a concern for the Commission long before the Act came fully into force; Gambling Commission, Annual Report 2008/09, supra note 5, p. 21. As some illegality may be a product of the licensee’s ignorance of the law, the Commission has issued guidance in particular on poker and poker tournaments. See the Commission’s Consultation on the code of practice on equal chance gaming in clubs and premises with an alcohol licence (October 2009). 75 Government policy towards bingo gradually softened under the old law, though in the absence of primary legislation the basic regulatory structure remained unchanged. The 1968 Act allowed operators to install four ‘jackpot’ gaming machines offering a maximum prize of £500, on the income from which operators came increasingly to rely. Under the 2005 Act licensed bingo operators may install up to eight B3 machines (£1 stake and £500 prize). 76 By section 35 s. 33 does not apply to ‘making a gaming machine available for use’. But by section 37(2) it is a offence for premises to be used for this purpose unless authorised by a premises licence or by an exception (s. 37(7)). 77 These include gaming machines on premises that have an alcohol on-licence, clubs, and unlicensed FECs. See Smith and Monkcom, chapter 25, paras. 25.125–25.234. Permits 139

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that there is no statutory definition of this key phrase, ‘available for use’, but the Commission has advised that a machine fits this description where a person can play it. A casino may have a number of machines stored on the premises to replace those currently in use; these stored machines are not ‘available for use’. This is of crucial importance in determining whether the operator complies with the statutory limits on numbers that apply to the premises. Here again I shall not be concerned with machines that are excepted under the Act, but only with those in respect of which operating, personal and premises licences are required. First, non-remote casino, bingo, general and pool betting operating licences without more authorise the licence holder to make gaming machines available for use. This authorisation is a necessary but not a sufficient condition of any gaming machine in fact being made available: that depends on the licensing authority’s issue of a premises licence.78 Secondly, operating licences specific to gaming machines are required only in respect of two kinds of commercial activity. The first are general operating licences in respect of either a ‘family entertainment’ or an ‘adult gaming’ centre. The purpose of this differentiation in what are colloquially called ‘amusement arcades’ (hereafter FEC and AGC) is precisely to permit tougher regulation of those centres designed for and frequented by children. I deal shortly with the classes and numbers of those machines, and with such other matters concerning their availability as the limits on stakes and prizes. Gaming machine technical operating licences are, secondly, required by those engaged in any way in the manufacture, supply, etc of machines or of gambling software.79 The regulation of the circumstances in which gaming machines may be made available for use is a microcosm of the Act’s overall regulatory structure. Part 10 is framework legislation within which more detailed regulation may be made, for example, as to the classes, use or supply of machines.80 Regulatory

are required when premises provide gambling facilities but either the value of stakes and prizes are very low or gambling is not the premises’ main function. These permits allow the use of a gaming machine. Commercial betting in pubs and clubs is a long-standing but illegal social practice, which prompted the Commission to issue a leaflet to licensees, followed by warnings for serial non-compliance; Gambling Commission, Annual Report 2008/09, supra note 5, p. 17. 78 Section 68(3) and (4) authorise the provision of facilities for betting on a virtual game for both casino and general betting operating licences. The premises licences are dealt with in section 173. 79 There currently three such kinds of operating licence. An ‘ancillary’ remote operating licence is required where a ‘technical’ supplier is engaged in supplying software for remote gambling. 80 In addition, the provisions that enable the Commission or the Secretary of State to impose conditions on an operating licence apply equally to conditions concerning gaming machines. 140



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leverage is exerted by defining machines according to their levels of stakes and prizes and then allocating them to one of four categories, which in turn define the premises in which they may be made available for use. These levels and categories, together with the circumstances in which a machine may be made available for use are set or reset by regulations made under ss. 236 and 240. Section 236 authorises regulations to be made by reference to the amounts paid in respect of the use of a machine, the value and the nature of prizes, the nature of the gambling for which and where it can be used. The use of stakes and prizes as the regulatory levers reflects the position under the Gaming Act 1968.81 But as they were stated in the Act any amendment to a machine’s defining characteristics required primary legislation, an inertial factor that contributed to the FOBT dispute. While the core definition of a gaming machine is stated in s. 235,82 the 2005 Act’s flexibility is a major advance on the old law. 6.3. The Categorical Structure Section 236(1) specifies four categories of gaming machine, A-D. These categories need to be read alongside ss. 172–175 of Part 8 of the Act (premises licences) to discover the locations in which they may be made available for use, and in what number. This is best shown in the following list, though this is itself simplified. Broadly speaking, the greater the degree of regulatory control exerted by the operating licence the more extensive the machine entitlement in respect of the relevant premises. Non-remote casino, bingo and betting operating licences entitle the holder to install any combination of Categories B, C and D machines on their premises, subject to the limits mentioned below. An AGC premises licence authorises the same combination but a FEC licence is restricted to Categories C and D. In addition, the number of machines in any permissible category for a given set of premises varies not only by reference in the case of regional, large

81 Under the Gaming Act 1968 the Gaming Board conducted triennial reviews of stakes and prizes, a practice that the Commission has adopted. And like its predecessor it has in response to industry representations on occasion accelerated the review process. The last major change came into force on 1 January 2009, doubling the limits for Categories C and D machines. These announcements are invariably greeted with dismay by groups concerned with problem gambling; The Times, 5 January 2009, p. 3. 82 Section 235(5) authorises regulations to provide that a single piece of apparatus may be treated as more than one machine. See the Gaming Machine (Single Apparatus) Regulations 2007, SI 2007 / 2289. These regulations provide that a single gaming machine which can be used by more than one person at a time is to be treated as the number of machines equal to the number of persons able to use it. This is important where the numbers of machines permitted on any premises is limited. They also preclude an operator from installing a ‘central’ gaming machine from which a number of others are run, with the effect of increasing the total of playing places (machines) beyond the statutory limit. 141

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and small casinos to the number of gaming tables used,83 but also to the number of lower-category machines that are installed. For example, existing 1968 Act casinos may install a maximum of 20 Category B machines; but if they do not, they may have an unlimited number of Category C and D machines. Industry data show that in 2008/09 there were some 248,000 gaming machines publicly available, a figure that has remained broadly stable over a number of years. The gross profit from machines installed in the two licensed arcades was £490 million, and the total across the non-remote sector was some £1, 963 million.84 6.3.1. Category A There are no limits on the stakes and prizes for these machines. They may be located only in a ‘regional casino’ as defined in s. 172(3); their number is determined by reference to the number of gaming tables in the proportion N x 25, subject to an overall limit of 1,250. A regional casino is also authorised to make any category of machine available for use, but following a lengthy and acrimonious political debate about its location the Prime Minister determined that there would be no regional casino.85 As the matter is unlikely to be revived in the near future I make no further reference to it. 6.3.2. Category B By regulations made under s. 236 there are now five sub-categories of category B.86 They differentiate machines according both to their stakes and prizes (though not they are not a financial hierarchy), and their location and number. Two connected general points may be made. Any Category B machine except Category B3A may be installed in any casino and only casinos may install a Category B1 machine. There are additional restrictions for all other licensed premises. 6.3.2.1. Category B1 The maximum permitted charge is £2 and the prize £4,000. They are permitted in the new ‘large’ and ‘small’ casinos, each of which is permitted eight B1 machines by s. 175, and in the existing 1968 Act casinos. The number of machines that 83 It follows from this that the definition of a ‘gaming table’ is of considerable significance. See Gambling Commission, Consultation on Premises Licence Conditions under section 172(6) (Gaming Tables) (February 2009), and the resulting statutory instrument, Gambling Act 2005 (Gaming Tables in Casinos) (Definitions) 2009, SI 2009 / 1970. 84 Gambling Commission, Industry Statistics 2008/09. 85 See Miers, D., ‘Another U-Turn: Great Britain’s Casino Questions and Other Gambling Issues’, Gaming Law Review, 11 (2007), 699–713. 86 Categories of Gaming Machine Regulations 2007, SI 2007 / 2158. 142



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‘large’ and ‘small’ casinos may install is, like the regional casino, determined by reference to the number of gaming tables above one, in the proportion of N x 5 and N x 2, subject to an overall limit of 150 and 80 respectively. Currently there are no ‘large’ or ‘small’ casinos, as the local authorities in which they may be sited have not, as they are required, published the principles under which competition for a licence will be conducted. As noted above, 1968 Act casinos may install 20 Category B1 machines 6.3.2.2. Category B2 This category was specifically designed to legitimise FOBTs. The maximum permitted charge is £100 and the prize £500, and they may be located only in casinos and premises licensed for betting. Generating a high gross gaming yield they remain very popular with betting operators, who may install a maximum of four B2 machines. They are equally unpopular with the agencies that dealing with problem gambling.87 6.3.2.3. Categories B3 and B3A Machines within these categories have the same maximum permitted charge (£1) and prize (£500) but differ in their location and number. Premises licensed for bingo may install eight and AGCs four B3 (or B4) machines.88 Category B3A machines are limited to lottery machines and are only permitted in premises that constitute a ‘club’ under Part 12. Such premises may only have a total of three Category B3A, B4, C or D machines and only one of Category B3A. 6.3.2.4. Category B4 The maximum permitted charge is £1 and the prize £250. These machines may be used in any of the premises identified under Category B.

87 There is speculation that because of the apparent connections between FOBTs and problem gambling, Category B2 machines will be a soft target for increases in gaming machine duty. See The Observer, 14 June 2009, Business Section, p. 2. 88 Bingo has over the past decade seen an annual reduction in the number of operating clubs. It was also adversely affected by the reduction under the 2005 Act of its permitted Category B3 machines to four and by the general ban on smoking in enclosed places. In June 2008 DCMS announced that as a ‘one-off ’ measure designed to help this sector, that number should be doubled. Gambling Act 2005 (Gaming Machines in Bingo Premises) Order 2009, SI 2009/324. 143

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6.3.3. Category C From 1 July 2009 the maximum permitted charge is £1 and the prize £70.89 These machines may be used in any of the premises identified under Category B and in FECs. 6.3.4. Category D Although Category D machines have the lowest maximum permitted stakes and prizes they have been productive of some of the most intense debates concerning their control. Unlike all the other categories they may be made available to persons under 18 years of age. There are three subcategories: those that offer money prizes only, those that offer non-money prizes only, and a hybrid that offers both. If the prize contains cash the stake is 10p and if it is entirely non-cash the stake is 30p. A cash prize must not exceed £5 and a non-cash prize cannot exceed £8 in total. DCMS has created two new sub-categories within Category D that increase the limits on two long established arcade machines. ‘Pusher’ machines have a 10p stake and a £15 non-cash or £8 cash prize, and ‘crane grab’ machines have a £1 and a non-cash £50 prize.90 Category D machines are the 2005 Act equivalent of the ‘amusement with prizes’ machines that have been commonplace in and have provided a significant income to seaside arcades. As the legislation went through its parliamentary stages the arcades’ operators became increasingly concerned about its impact; in the event the government permitted their continuance, but with some slight variations in the matter of stakes and prizes. Amusement with prizes machines were also the target of many groups who argued that it was undesirable that they should be available in unregulated premises such as take-away and fish-andchip shops. Any child could use them, with the potential for long-term harm. Following a long campaign DCMS agreed to prohibit Category D machines from these and similar premises with effect from 31 July 2009.91 6.4. The Application of the Licensing Objectives Having summarised the core elements of the regulatory regime for gaming machines, I turn to consider how the Gambling Commission has given effect to the Act’s three licensing objectives when implementing that regime. This consideration is informed by three of its central statements, Principles (2009), Licensing (2009) and LCCP (2008).

89 Categories of Gaming Machine (Amendment) Regulations 2009, SI 2009 / 1502. 90 Ibid. 91 This entailed the non-renewal of licences issued under the Gaming Act 1968. See Gambling Commission, Gaming machines sited on premises. 144



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6.4.1. Preventing Gambling from being a Source of Crime or Disorder, being Associated with Crime or Disorder or being Used to Support Crime Paragraph 4.2 of Principles (2009) provides that in ensuring that gambling does not become a source of crime or disorder, the Commission will focus in particular on the suitability of applicants for operating and personal licences. Of particular relevance is the obligation in s. 70(1)(c), that the Commission ‘shall consider the suitability of any gaming machine to be used in connection with the licensed activities.’ The Commission is to give priority to crimes in which gambling is an intrinsic element, for example, illegal gambling, financial crimes such as money laundering, including offences, and crimes that affect the outcome of gambling for other participants.92 These considerations apply with equal force to all operating licences, and thus to operating licences that authorise any activity concerning gaming machines. Given their poor rate of return it is unlikely that anyone would seek to launder the proceeds of crime directly through a gaming machine. But it is by no means difficult to conceive of them being integrated into an otherwise lawful operation connected with the location, manufacture or supply, etc of a machine. Regulations made under Part 7 of the Proceeds of Crime Act 2002 implement the Third Directive on Money Laundering.93 This is too substantial a subject even to summarise here; it is enough to note that following one of its routine consultations the Commission published guidance to remote and non-remote casino operators on these regulations.94 More recently it published advice for operators and small businesses to help them to comply with the 2002 Act;95 it is also monitoring the casino industry’s compliance with its social responsibility conditions following these changes in the law.

92 Principles (2009), para. 4.9. See generally LCCP 2008 Part I, conditions 3 (financial robustness), 4 (protection of customer funds) and 5 (cash handling), and Part II, provision 1 (financial requirements). 93 Money Laundering Regulations 2007, SI 2007 / 2157, implementing (and going some way beyond) Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, [2005] OJ L 309. 94 Gambling Commission, Prevention of Money Laundering and Combating the Financing of Terrorism. The regulations also required a change to the LCCP 2008 Financial Requirements for casino operators. For non-casino operators, Duties and Responsibilities under the Proceeds of Crime Act 2002: Advice to operators (excluding casino operators). Generally, see Smith and Monkcom, chapter 17. 95 Gambling Commission, POCA: Proceeds of Crime Act 2002: Information for small businesses (September 2009). The Commission is a supervisory body under the 2007 Regulations; Gambling Commission, Annual Report 2008/09, supra note 5, p. 14. The identity cards issued by the UK Border Agency to all foreign nationals may be used by casinos to identify their customers. 145

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A second major issue that falls under the first licensing objective is the presence of unauthorised machines on premises both licensed and unlicensed under the Act. This is also a matter of concern for the second objective, as illegal machines are unlikely to offer fair and open conditions for the player. The Commission has, in conjunction with other law enforcement agencies, been pursuing a vigorous enforcement policy to locate and prosecute persons unlawfully operating gaming machines.96 It has also engaged licensed suppliers by appealing to their commercial self-interest in maintaining a ‘clean’ industry and reminding them that it is their responsibility to ensure that they do not supply machines to unauthorised premises or operators.97 This unlawful use may arise from a range of circumstances, including the absence of a required permit for the premises or a failure to pay the required duty. The sanctions that the Commission has reported have tended to be low level fines (ranging from £250 to £2,500) imposed on single defendants, suggesting that the abuses that have been uncovered do not reflect any systematic attempt to evade the Act, but rather, ignorance of its requirements.98 6.4.2. Ensuring that Gambling is Conducted in a Fair and Open Way The Commission expects that not only is gambling fair in the way it is played, but that the rules are transparent to players and they know what to expect. The statement identifies a number of ways in which it aims to achieve this objective. These include the requirement that operators provide players with easily understandable information about the rules of the game, the probability of losing or winning, and the terms and conditions on which business is conducted. Of particular mention are the technical standards for gaming machines.99

96 These are the police, licensing authorities and Her Majesty’s Revenue and Customs. By 31 March 2009 144 unlawfully sited machines had been removed and a small number of convictions obtained under sections 242(1) and 243(1). Gambling Commission, Annual Report 2008/09, supra note 5, p. 16. 97 ‘Combating illegal gambling also benefits licensed operators, as the provision of illegal unregulated gambling has both a reputational and economic impact on the gambling industry as a whole’; Licensing (2009), section 6, para 6.4. ‘Too many machines are being supplied illegally to benefit criminals at a cost both to society and the legitimate gambling industry. The licensed industry can help us by ensuring machines are supplied by licensed operators and by adding to our growing intelligence in this area.’ Commission Press Release 18 September 2008. LCCP 2008 Condition 15.1 (information requirements) requires licensees to provide the Commission with any information that they know relates to or suspect may relate to the commission of an offence under the Act. 98 Machines manufactured, supplied or owned by an individual before 1 September 2007 were treated as ‘legacy’ machines and the new technical standards did not apply to them. 99 Principles (2009), paras. 4.13, 4.15 and 4.18. See generally LCCP 2008 Part I, conditions 7 (general ‘fair and open’ provisions), 9 (types of rules of casino and other games) and 146



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Together with ss. 96 and 236, s. 240 is a third key element of the regulatory framework. As we saw, s. 236 concerns the amount, value and nature of a machine’s stakes and prizes, its location and the nature of the gambling for which it can be used. Section 240 is aimed at more detailed regulation of the method by which stakes are deposited or payments made for the use of the machine, the proportion of stakes that is returned as prizes and the arrangements for claiming and receiving prizes, and rollover of stakes and prizes. It also authorises regulations to be made as to ‘the display of information’ and ‘any other matter’.100 These regulations are made by DCMS; s. 96 gives the Commission power to set technical operating standards for gaming machines, and a fourth key element is s. 241, which authorises the making of regulations as to the supply, installation, adaptation, maintenance or repair of a machines. It is not possible to deal in any detail with the extensive regulations that have been made under these various headings. Under s. 96 the Commission had by 1 January 2009 produced a gaming machine testing strategy with other documents setting out technical standards relating to different kinds of machine,101 and a range of licence conditions and code of practice provisions for different operating licences.102 These various standards and conditions relate to such matters as system integration in machines, speed of play and game links in Category C and D machines, stakes and prizes for Category 3BA machines, and revised bingo and casino technical requirements to meet Directive 98/34/EC.103 This Part concludes with two detailed examples, both of which present similar issues concerning the nature and presentation of a game played on a machine. As we noted in Part 6.4.1, illegal machines may compromise the consumer protection values implicit in ‘fair and open’ conditions for gambling. The same is true of machines that misrepresent the nature of the activity that the player purchases. ‘Skills with prizes’ (SWP) machines have been an important part

10 (tipping of casino employees), and Part II, conditions 3 (‘fair and open’ provisions), 5 (complaints and disputes) and 6 (gambling licensees’ staff). The integrity of sports betting has been a matter of concern for some time, in particular in connection with horseracing. The Commission continues to press the responsible sports governing bodies and the betting operators to co-ordinate more closely; see its Annual Report 2008/09, supra note 5, p. 19 and its publication Integrity in Sports Betting. The Commission’s Industry Statistics 2008/09 note that 36 of 48 instances on suspicious betting practice reported between 1 September 2007 and 31 March 2009, 31 of which were reported under LCCP 2008 15.1, were either substantiated or under investigation (p. 5). 100 Gaming Machines (Circumstances of Use) Regulations 2007, SI 2007 / 2319. 101 Smith and Monkcom, paras. 25.21–25.22. The Commission has approved GU Europe BV and iTech Labs to test compliance with technical standards. 102 LCCP 2008 Part I, condition 2 (technical standards and equipment specifications). 103 Technical Standards and Regulations Directive. See . 147

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of the entertainment provided by arcades and public houses. For a relatively small payment (50p) the player engages in what in other contexts would be a video game or a quiz based on a popular TV format. The issue to which SWP machines give rise is whether they are ‘games of chance’, in which case they constitute gaming and are thus unlawful where used without authorisation. Section 6 of the Act provides that a game of chance is any game that involves an element of chance and skill, but which does not include a sport. Unlike in other jurisdictions, it is irrelevant that a player may by the exercise of superlative skill eliminate the element of chance.104 In the absence of direct regulation under the Act the Commission has agreed with the industry that an SWP will not be treated as a gaming machine provided that it meets specific conditions. One of these is that the games ‘should be designed and operated to be fair to customers and rules should be available for view prior to the game commencing’; another is that there must be no element of chance.105 The Commission has lately become concerned that some SWP games continue to be designed to look like games of chance, and also have concerns about the control mechanisms used in some machines. The Act provides, conversely, that a ‘game of chance’ includes a game ‘that is presented as a game of chance’. It follows from this that machines that look like they offer a game of chance will be subject to the same amusement machine licence duty as those that in reality do so offer. This fiscal equivalence may well act as a disincentive to install them; in any event this gives the Commission some leverage.106 The second example concerns the use of machines to play bingo. Under s. 8 of the 2005 Act bingo must be ‘equal chance gaming’; otherwise it would be a ‘casino game’ (s. 7(7)) and could not be played under a bingo operating licence. The position was similar under the 1968 Act, which permitted what was known as mechanised cash bingo (MCB). This was played on machines that looked like, but were exempt from the strict controls on, gaming machines. Under the 2005 Act a machine used for playing bingo is not a gaming machine. Section 235(2) (e) thus permits the continuation of MCB machines. Under the new law licensed bingo premises are, as was previously the case, permitted to install a limited 104 This maintains the position under the 1968 Act. In R v. Kelly [2008] EWCA Crim 137 the question arose whether Texas Hold’Em Poker is a ‘game of skill’ under that Act. The Court of Appeal held that notwithstanding that it was a game of combined (high) skill and chance, it was, as the Act provided, a game of chance. On the matter of skill and chance see Turner, N., ‘Viewpoint: Poker is an Acquired Skill’ Gaming Law Review and Economics, 12 (2008), 229–230 and Heubeck, S., ‘Measuring Skill in Games: A Critical Review of Methodologies’, ibid., 231–238. 105 Smith and Monkcom, para. 25.84. 106 See the Joint Statement between Her Majesty’s Customs and Excise and the Gambling Commission in relation to amusement machines which offer games designed to look like recognised games of chance (December 2009). 148



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number of gaming machines. But as there are no limits on the number, stakes or prizes of MCBs the industry is keen to find new ways of devising ‘machine’ bingo games but which are not ‘gaming machines’. This places a considerable burden on the definition of bingo: but the Act (s. 353) says only that ‘“bingo” means any version of that game, irrespective of the name by which it may be described.’ This lacuna has prompted the Commission to publish a list of bingo’s key characteristics. As noted earlier, operators’ have every incentive to maximise their customers’ access to gaming machines or, in this case, machines that look like gaming machines. The Commission’s concern is the potential for misrepresentation of the nature of the game. In line with its general approach, the Commission is consulting and giving the industry the opportunity to be compliant but will consider a more formal regulatory route if that does not prove possible.107 6.4.3. Protecting Children and Other Vulnerable Persons from being Harmed or Exploited by Gambling The third licensing objective has two strands, the first aimed at protecting children from being harmed or exploited by gambling. As we are here principally concerned with non-remote gambling by machine, we may note the Commission’s concern that licensing authorities ensure that ‘gambling premises are presented in such a way that access by children can be prevented.’108 Part 4 of the Act creates a general structure governing children’s and young persons’ engagement with gambling. The minimum age at which persons may participate in gambling by any means is 18; young persons of the ages 16 and 17 may participate in lotteries and football pool betting, while any person, including a child (aged 15 and under) may gamble on a Category D machine. The second strand has the same objective in relation to ‘vulnerable persons’. Unlike children and young persons, there is no statutory definition of persons falling within this group. The Commission considers it to include persons who gamble more than they want to, beyond their means, or who may not be able to make informed decisions.109 A particular statutory control is the prohibition on the supply or installation of any gaming machine designed or adapted to permit money to be paid by credit or debit card.110 The Commission’s role does 107 Gambling Commission, Annual Report 2008/09, supra note 5, p. 4. 108 Principles (2009), para. 4.21. In the case of remote gambling, the Commission will, require operators ‘to ensure that there are adequate age verification measures in place to prevent children and young persons gambling on their sites’; ibid., para. 4.23. 109 Principles (2009), para. 4.25. 110 Gaming Machine (Supply etc) Regulations 2007, SI 2007 / 2320. These regulations substitute for s. 245, which was repealed by the Gambling Act 2005 (Repeal) (Remote Operating Licence and Credit) Regulations 2007, SI 2007 / 2321. 149

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not extend to treatment or care of those who have gambling problems. However, s. 24 requires it to include in its codes of practice the arrangements that should be made by operators for making assistance available to people who are or who may be affected by problems related to gambling.111 In addition to this, the Commission has, as explained briefly in the conclusion to this chapter, established a body to set priorities for prevention and treatment. As Principles (2009) comments, operators will be required as conditions of their premises licences to introduce and enforce measures to keep children and young persons out of those parts of their premises in which Category A-C machines are installed. For example, s. 182 provides that the licensee of a horse-race track shall ensure that children and young persons are excluded from any area where a gaming machine other than a Category D machine is situated. This is one example of the general prohibitions in s. 47. These make it an offence to invite a child or young person to enter a casino, a betting office or an AGC, all of which may install Category B or C machines. Similarly, it is an offence to invite a child or young person to enter an FEC when a Category C machine is accessible and available for use.112 In the case of a casino, s. 176 requires the Commission to issue a code of practice ‘about access to casino premises by children and young persons.’ This imposes on the operator a duty to engage physical checks or barriers to entry, including the deployment of staff as ‘door supervisors’, and to check persons’ identify where they appear to be underage. Operators’ procedures can be monitored by the Commission’s inspectorate, and by the well tried ‘mystery shopper’ device,113 which the National Lottery Commission has also successfully used for many years to check the sale of Lottery tickets to children.114

111 These are social responsibility code provisions and by virtue of s. 82 are licence conditions. See LCCP 2008 Part II, provision 2 (protection of children and other vulnerable persons). 112 The Commission’s Industry Statistics 2008/09 note 4,304 recorded instances of a person under 18 entering and 313 gambling in an AGC, and 157 instances in which a person under 18 gambled on a prohibited machine in an FEC. 113 See Gambling Commission, Annual Report 2008/09, supra note 5, pp. 4 and 6 (betting shops and AGCs). During 2009 the Commission retested the betting operators who failed an earlier exercise, which revealed ‘a disturbing failure rate’ of 98 of 100 betting shops in which a 17-year-old has been allowed to make a bet. This attracted national news media, The Observer, 11 May 2009, p. 17. The Commission’s Industry Statistics 2008/09 note 85,097 recorded instances of a person under 18 entering a betting shop and 22,202 making a bet; eight recorded instances of a person under 18 gambling in bingo premises, and 44 who entered a casino and 11 playing there. 114 See National Lottery Commission, British Survey of Children, the National Lottery and Gambling 2008–09. . 150



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I have remarked on the final phasing out of permits issued under the 1968 Act that permitted what are now Category D machines to be situated in unregulated premises frequented by children. But they remain available to be played by children, for example in FECs. During 2008/09 the Commission conducted a review of Category C and D machines, whose findings are of importance in demonstrating the Commission’s evidence-based approach to regulation. In 2009 the stakes and prize limits were increased on these two categories of machine. This was done ‘principally to provide economic support to seaside arcades’, a colloquial and long-established description of AGCs and FECs. One aspect of this support was the creation of two new subcategories within Category D (‘pusher’ and ‘crane grab’ machines). These are traditional elements of amusement arcades, and now attract higher prizes than the standard ‘amusement with prizes’ (AWP) machines. As part of its overall review of Category C and D machines, the Commission advised DCMS that provided appropriate controls were put in place it did not consider that the proposed increases would pose a threat to the licensing objectives. But this was balanced following later reassessment. This introduced compensatory measures to slow the average speed of play for Category D AWP games and restricted the number of game links on Category C machines.115 The Commission has also been conducting a more general desk-based review of the impact on the player of high-stake, high prize gaming machines, the results of which were published during 2008 and 2009. The initial conclusion is that studies of adult players in Great Britain provide only limited evidence of any potentially harmful effects. The Commission has recommended further research, a matter that is a priority for the newly established Responsible Gambling Strategy Board,116 to which I turn by way of brief conclusion.

7. The Responsible Gambling Strategy Board Two years ago DCMS asked the Gambling Commission to carry out a review of the voluntary arrangements for the industry’s funding for gambling research, education, and treatment. Its final report was published in October 2008. One of its recommendations was the creation of a new Board to develop a strategic framework and priorities for the distribution of funding for these three objectives. The Commission established the Responsible Gambling Strategy Board (RGSB) as an independent expert body in late 2008. It advises the Commission and in turn DCMS on the research, education and treatment priorities required to

115 Gambling Commission, Annual Report 2008/09, supra note 5, p. 19. 116 Gambling Commission, Impact of high-stake, high-prize gaming machines on problem gambling (December 2008), High-stake, high-prize and other gaming machines (June 2009), and Annual Report 2008/09, supra note 5, pp. 5 and 24. 151

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support a national responsible gambling strategy, and on the associated funding requirements.117 The RGSB also provides a remit to the Responsible Gambling Fund (RGF). RGF is responsible for distributing funds to these three objectives,118 taking full account of RGSB’s strategy and priorities. Those funds are raised from the industry on a voluntary basis, initially through a charity known as the Responsibility in Gambling Trust, which also formulated a spending policy. The collection of funds is now managed by The GREaT Foundation.119 In summary, the RGSB’s terms of reference are: 1. To advise on a national responsible gambling strategy 2. To develop a strategic framework and priorities for the distribution of funding for research, education/prevention and treatment 3. To advise on the funding needed to deliver them In September 2009 the Board published its initial strategic priorities, noting areas where there are still questions that need to be answered. The Board intends to open a dialogue with user groups and key stakeholders during 2010, as it moves to a fuller set of recommendations.120

117 . See Gambling Commission, Annual Report 2008/09, supra note 5, pp. 22–23. I am a Board member but do not write here in that capacity. 118 See the RGF’s website; . 119 Fundraising for Gambling Research, Education and Treatment of problem gambling. . 120 Research, education and treatment: An initial strategy and priorities. See the website . 152

The New Belgian Gambling Regulation in the European Context Nele Hoekx

1. Introduction Since 1999 the Law on gambling, gambling venues, and the protection of players1 (hereafter ‘Gambling Act’) regulates a substantial part of the Belgian gambling scene. In recent years the Gambling Act was however faced with a lot of challenges, so the need for modification arose. Ten years after its introduction the Act received a thorough face-lift in an attempt to deal with issues as online gambling, betting and media games. This article provides an overview of the most important amendments of the Belgian Gambling Act. Given the recent evolutions with regard to gambling on the EU level, an examination of the compatibility of the Belgian amendments with Community law will complete the analysis.

2. The Situation before Amendment of the Gambling Act of 1999 2.1. The Situation before the Gambling Act of 1999 Before 1999 the Belgian gambling regulation was fragmented, consisting of legislation that was barely adapted to modern times. The very general Gaming Act of 19022 prohibited all forms of gambling, with just a few – minor – exceptions. E.g. casinos were legally prohibited, but in practice the presence of eight casinos was tolerated for over a century. Furthermore there was the act of 1851 regulating charitable lotteries.3 This law is still in force, as are some general provisions in

1 MB (Moniteur belge) 30 December 1999. 2 MB 22–23 December 1902. 3 MB 7 January 1852. Littler et al. (eds.), In the Shadow of Luxembourg, 153–189 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

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the Criminal Code (articles 301–304). The organisation of horserace betting required an authorisation by the Minister of Finance according to tax law4 and certain types of sports betting required a licence issued by the Minister of Sports.5 The National Lottery was at that time regulated by a specific act, the act of 22 July 1991.6 There was a clear lack of coherent supervision and certain forms of gambling operated in the grey area. 2.2. The Introduction of the Gambling Act The Gambling Act changed the Belgian gambling scene thoroughly. The underlying idea was to provide an overall regulation controlled by a single regulatory body. The principal objectives of the Gambling Act were7: – to channel the human desire to gamble into legal gambling circuits with a view to protect the player, guarantee the integrity of the game and prevent crime;

– to organise an effective control on all gambling activities;



– to install a skilled and efficient licensing body that gives advice and assures compliance with the gambling legislation.

The Gambling Act was innovative in several ways. Two spearheads were the licence system and the installation of the Gaming Commission. All gambling remains prohibited, unless the activity is licensed (article 4). Five types of licence were created: – licence type A for casinos (9 in total);

– licence type B for gaming machine halls (180 in total);



– licence type C for bars – they have the right to place two ‘bingo’ machines;



– licence type D for staff employed in a casino or gaming machine hall;



– licence type E for the sale, letting, lease, delivery, putting at disposal, import, export, manufacture and services concerning maintenance, repair and equipment of games.

4 Article 66 Code des taxes assimilées aux impôts sur les revenus and articles 44–56 Arrêté royal of 8 July 1970 portant règlement général des taxes assimilées aux impôts sur les revenus and articles 6–7 Arrêté ministériel of 17 July 1970 d’exécution du Code des taxes assimilées aux impôts sur les revenus. 5 Loi 23 June 1963 relative à l’encouragement de l’éducation physique, de la pratique des sports et de la vie en plein air ainsi qu’au contrôle des entreprises qui organisent des concours de paris sur les résultats d’épreuves sportives, MB 25 December 1963. 6 MB 31 July 1991. 7 Proposition de loi sur le jeu, amendement, Doc. Parl. Senate, 1-419/4, pp. 24–25. 154



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The licences are delivered by the Gaming Commission that also has an advisory and controlling role. The Commission is established within the Ministry of Justice and composed of representatives of the Ministers of Justice, Home Affairs, Finance, Public Health, Economics and the Minister who has the National Lottery in his competences (article 10, §2). Player protection also received a central role in the Gambling Act with as tailpiece the possibility for the player to ask to be barred from casinos and gaming machine halls (article 54, §3, 1°). The enforcement by the operators of these exclusions is closely monitored through the means of a centralised electronic system. This possibility of self-exclusion is rather progressive in Europe.8 Although the Gambling Act already remedied to a certain extent to the fragmentation of Belgian gambling legislation, one important dichotomy was left intact. On the one hand we have the private operators who are being licensed under the Gambling Act. On the other hand there is the National Lottery, regulated by its own – also recent – act9 and not subject to the control of the Gaming Commission. The National Lottery owns a monopoly for the provision of lotteries and has also the right to offer gambling and betting (article 6, §1, 1°-3° National Lottery Act 2002), although it did not make use of the latter option to date. Moreover, the act grants the Lottery the right to offer its products via the internet (article 7), an option brought into practice only very recently.10 2.3. Attempts to Modify the Gambling Act 2.3.1. Needs for Modification Although the Gambling Act tried to offer a coherent and complete framework, the need for modification quickly arose.11 Three decisive factors can be identified. Firstly, an important part of gambling was left out of the original Gambling Act, namely betting. Betting on sport events was exempted from the Act’s scope and regulated elsewhere in a rather incoherent way. Betting on other (non-sport) events by contrast was not excluded and as a consequence prohibited, as the

8 Hoekx, N., ‘Le joueur pathologique perd-il toujours? Les conséquences civiles de l’interdiction d’accès d’un joueur en Belgique’, ERPL, 17/3, (2009), 437–451. Marique, E., ‘Les mesures de protection du joueur’, in Hoekx, N. and Verbeke, A.L. (eds.), Kansspelen in België/Les jeux de hasard en Belgique (Brussels: Larcier, 2009), p. 106. 9 Loi of 19 April 2002 relative à la rationalisation du fonctionnement et de la gestion de la Loterie Nationale, MB 4 May 2002 (National Lottery Act 2002). 10 Arrêté royal of 24 November 2009 fixant les modalités générales de la participation aux loteries publiques et concours organisés par la Loterie Nationale au moyen des outils de la société de l’information, MB 3 December 2009. 11 Andries, K., Carette, N. and Hoekx, N., Les jeux et paris:  analyse critique des éléments constitutifs de la définition légale (Brussels: Larcier, 2008), pp. 31–32. 155

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Act did not provide for a type of licence for this form of gambling. It seemed appropriate to include all betting under the Gambling Act thus bringing it under the supervision of one regulator.12 Secondly, the Act had not foreseen the enormous boom of modern communication technology. It had no means to deal with the exponential growth of online gambling. This type of gambling was plainly prohibited because – as for betting – the Act did not contain a licence for it. The prohibition was rather one out of impotence due to a lack of regulation than that is was a deliberate total prohibition. The prohibition was barely enforced in practice.13 Furthermore the Belgian Government took the view that it missed out on important tax income by not having a regulatory framework allowing online gambling to a certain extent.14 Thirdly the beginning of this century saw a new phenomenon: the so-called ‘belspelletjes’ (call-in television quizzes), television shows that fully existed out of the answering of questions by viewers calling the quiz master. In most cases the caller had to call several times to enter the live show and the questions were often deceiving. The telephone costs of some viewers took unreasonable heights. The Gambling Act did not have a suitable answer. The shows qualified as gambling and were thus prohibited in theory. However these television programmes rapidly expanded in popularity and became part of the programme schedules of almost all broadcasting companies, so that a total prohibition proved to be unworkable in practice. 2.3.2. Amendments and Failed Attempts In the past the Gambling Act was only modified marginally on an ad hoc basis. There were some minor changes e.g. to ensure the profitability of casinos, such as allowing the use of credit cards in these venues and the offer of small gifts to customers.15 To meet the challenges mentioned above only isolated attempts were undertaken – without result.16

12 Projet de loi portant des dispositions diverses relatives aux jeux de hasard, Doc. Parl. House 2006–07, 51-2761/001, p. 60. 13 Proposition de résolution relative à la révision de la législation sur les jeux de hasard, Doc. Parl. Senate 2007–08, 4-418/1, pp. 1–2. 14 Reynders, D., ‘Aspects financiers et fiscaux des jeux de hasard’, in Hoekx, N. and Verbeke, A.L. (eds.), Kansspelen in België/Les jeux de hasard en Belgique (Brussels: Larcier, 2009), pp. 188–189. 15 Articles 135–138 Loi-programme 8 April 2003, MB 17 April 2003. 16 E.g. proposition de loi visant à modifier la loi du 7 mai 1999 sur les jeux de hasard, les établissements de jeux de hasard et la protection des joueurs, Doc. Parl. House 2001–02, 50-1920/001. 156



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In 2006 a regulation was introduced to deal with the ‘belspelletjes’.17 Curiously enough it was decided to exclude these games from the scope of the Gambling Act (article 3,4°) and to regulate them in a Royal Order.18 Regulation by the executive was necessary according to the legislature because the games concern a very technical matter susceptible to permanent evolution.19 Regulation that could easily be adapted was therefore necessary. Even if this is the case, the question remains why it was necessary to exempt these games from the Gambling Act and thus not consider them as gambling. The practical elaboration of many provisions in the Gambling Act is done by way of Royal Orders. Given this legal exception it is moreover not logical that one of the requirements of the Royal Order is that these games will be controlled by the Gaming Commission, keeper of the Gambling Act. The exception and Royal Order only concerned call-in television quizzes that constitute a full television programme. Other types of media games were left unregulated and thus prohibited, although they were tolerated in practice. The Royal Order of 2006 was replaced in 2009 to offer more protection to the player.20 Eventually Government itself introduced a more comprehensive bill to amend the Gambling Act in 2006, although the way of proceeding was hardly encouraging. For the Government tried to introduce a substantial modification of the Act quickly at the end of the year by means of a ‘programmawet’,21an act that is voted after little debate in Parliament at the end of the civil year and that contains provisions on all kind of subjects. The Council of State rightly reprehended this method of working.22 Such an important amendment needed a parliamentary debate. The proposed amendments were therefore taken out of the ‘programmawet’ and re-introduced in Parliament in a separate bill.23 17 Art. 322 Loi-programme 27 December 2004, MB 31 December 2004. 18 Arrêté royal of 10 October 2006 portant les conditions auxquelles doivent satisfaire les jeux proposés dans le cadre de programmes télévisés au moyen de séries de numéros du plan belge de numérotation pour lesquels il est autorisé de facturer à l’appelant, en plus du prix de la communication, également le prix du contenu, étant entendu que ce prix est limité aux séries pour lesquelles le tarif de l’utilisateur final ne dépend pas de la durée de l’appel, et qui forment un programme complet de jeu, MB 19 October 2006. 19 Projet de loi-programme, Doc. Parl. House 2004–05, 51-1437/001, p. 169. 20 Arrêté royal of 12 May 2009 fixant les conditions auxquelles doivent satisfaire certains jeux proposés dans le cadre de programmes télévisés au moyen de séries de numéros du plan belge de numérotation et qui forment un programme complet de jeu, MB 29 May 2009. 21 Projet de loi portant des dispositions diverses relatives aux jeux de hasard, Doc. Parl. House 2006–07, 51-2761/001, pp. 231–257. 22 Avis du Conseil d’État, Doc. Parl. House 2006–07, 51-2807/002, p. 9. 23 Projet de loi portant des dispositions diverses relatives aux jeux de hasard, Doc. Parl. House 2006–07, 51-2807/001. 157

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The principal ideas of the bill can be outlined as follows.24 All betting was brought under the scope of the Act, also sports betting and horserace betting. Media games, both call-in television quizzes and games offered via radio, newspapers and the like were excluded from the Gambling Act’s scope and left to a regulation by the executive, by analogy with the approach taken in 2006 with the call-in television quizzes. Online gambling would not be licensed but certified with a reliability label. Such a certificate would allow the player to assess the quality of the website. Another proposal was that the player would be criminally liable under certain circumstances. The proposal aimed at players participating in manifestly illegal gambling as well as those participating in games where they could manipulate the result, for example a football player betting on the result of the game in which he was playing. The latter proposal resulted from various betting scandals in the Belgian soccer world at that time, where players were bribed to influence the match result and thus the betting on these matches. It was also proposed to give the Gaming Commission more power, with the possibility to impose administrative fines in certain cases where the public prosecutor decided not to prosecute possible offences. The general elections of June 2007 however led to the dissolution of Parliament before the bill was voted. The Gambling Act was not amended and due to the political crisis and difficult formation of government that followed the elections, no new bill to amend the Act followed.

3. The Amendment of the Gambling Act In 2008 everything was undertaken to finally bring a legislative initiative to profoundly update the Gambling Act to a favourable conclusion. The Gaming Commission took the lead in this matter. It issued an advice that started from the 2006 bill but was better reflected on and more detailed, with other emphases.25 The Government took this advice as a point of departure to draft a new bill.26 The final bill was voted on 3 December 2009 and the law published

24 Projet de loi portant des dispositions diverses relatives aux jeux de hasard, Doc. Parl. House 2006–07, 51-2761/001, pp. 61–64. 25 Presented at the seminar ‘The Future of Gambling in Belgium. A Legal Analysis of Belgian Gambling Policy’, Leuven, 30 June 2008, not published. 26 Projet de loi portant modification de la loi du 7 mai 1999 sur les jeux de hasard, les établissements de jeux de hasard et la protection des joueurs, le Code des taxes assimilées aux impôts sur les revenus, de la loi du 26 juin 1963 relative à l’encouragement de l’éducation physique, de la pratique des sports et de la vie en plein air ainsi qu’au contrôle des entreprises qui organisent des concours de paris sur les résultats d’épreuves sportives et de la loi du 19 avril 2002 relative à la rationalisation du fonctionnement et de la gestion de la Loterie Nationale, Doc. Parl. House 2008–09, 52-1992/001 (hereafter ‘Bill 2009’). 158



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on 1 February 2010. The modified Gambling Act will be entirely in force on 1 January 2011 to the latest. In fact the Act will enter into force gradually, with the executive deciding when particular provisions come into being together with their implementing orders. The amendments were intended to deal with the three major challenges in a coherent way.27 A prohibition of gambling remains the general rule, with the granting of licences as an exception (article 4, §1). Betting, media games and gambling through information society instruments will be licensed, under supervision of the Gaming Commission. The leading thought behind the proposal is one of channelling: the illegal offer is tackled by the provision of a safe, legal offer. In other words, the human desire to gamble is channelled into controlled circuits. A channelling policy and a licence system imply that certain types of gambling are permitted and thus that people play – also vulnerable persons. The bill was not blind to this objective of the Gambling Act and therefore introduced additional measures to protect the player. Hereafter the most important new provisions of the Gambling Act will be discussed. First the seven new types of licence are considered. Then the increased sanction options of the Gaming Commission are reviewed as well as the additional protection offered to players. The last part deals with the impact of EU law on these new provisions. 3.1. New Types of Licences 3.1.1. Betting All betting, i.e. on sport events, horseracing and other (non-sport) events, is regulated by the Gambling Act from now on. If the National Lottery would decide to provide betting it would also have to follow the rules of the Gambling Act (article 3bis). To organise betting an F1 licence is required (article 43/3, §1). Every national of a Member State of the European Union or legal persons established under Belgian law or the law of a Member State of the European Union can apply for a licence F1 (as well as F2) (article 43/5, §1). Later divided into Projet de loi modifiant de la loi du 7 mai 1999 sur les jeux de hasard, les établissements de jeux de hasard et la protection des joueurs, en ce qui concerne la commission des jeux de hasard, Doc. Parl. House, 52-1992/007 and Projet de loi portant modification du Code civil, de la loi du 7 mai 1999 sur les jeux de hasard, les établissements de jeux de hasard et la protection des joueurs, du Code des taxes assimilées aux impôts sur les revenus, de la loi du 26 juin 1963 relative à l’encouragement de l’éducation physique, de la pratique des sports et de la vie en plein air ainsi qu’au contrôle des entreprises qui organisent des concours de paris sur les résultats d’épreuves sportives et de la loi du 19 avril 2002 relative à la rationalisation du fonctionnement et de la gestion de la Loterie Nationale, Doc. Parl. House, 52-2121/001. 27 Bill 2009, pp. 4–5. 159

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A new type of gambling venue is created, the gambling establishment class IV (article 6), a place exclusively reserved for placing wagers on the account of those holding F1 licences (article 43/4, §1, first subsection). Class IV gambling establishments may be mobile or fixed (article 43/4, §2, first subsection). A fixed establishment is allowed to sell specialised newspapers, sports magazines, gadgets and non-alcoholic beverages. Furthermore it has the right to operate two automatic gaming machines offering wagers on activities similar to those undertaken in the betting agency (article 43/4, §2, subsection 2). These machines will not offer online bets on e.g. sporting events taking place outside of Belgium but rather will enable bets to be placed on virtual events. This ‘cross-pollination’ between betting and another form of gambling is most regrettable, even if in the view of the legislator the chosen gaming machines are rather innocent amusement (e.g. the age limit is comparable to that of establishments class III). A strong feature of the Gambling Act was exactly that it made a clear division between all types of gambling with the different types of establishment partitioning the games. Someone in a gambling machine hall e.g. could not be tempted by a real life poker game. A player betting – a very specific type of gambling – might be tempted now to play on the available gaming machine and switch over to this ‘harder’ type of gambling. The permission to operate two machines was prompted by the economic sustainability of the operator – although it should be noted that the attractiveness of the chosen machines is questionable. The interests of the operator should certainly be taken into account, but at the same time the legislature should be consistent if his objective is genuinely a safe and well-considered gambling policy. A mobile gambling establishment is a temporary establishment used on occasion for the duration and at the location of an event, a sporting event or a sports competition (article 43/4, §2, subsection 3). Only wagers on that specific event or competition can be accepted in this mobile establishment (article 43/4, §2, subsection 4). To exercise a professional activity in a class IV establishment a D licence is required, as is the case for individuals employed in a casino or gaming machine hall (article 25, 4). Besides the F1 licence there is the F2 licence, required to accept wagers for the account of an F1 licensee. One F1 licensee may enter into an agreement with several F2 licensees. The F2 licensees accept bets in mobile or fixed class IV establishments. Outside these gambling establishments bets may be engaged in two exceptional cases (article 25, 7 and article 43/4, §1, subsection 2). These exceptions are the bets accepted on an ancillary basis by news agents on Belgian horse races (only pari mutuel) and on other sporting events (both pari mutuel and bookmaking) (article 43/4, §5, 1°) and totalisator betting on horse races that take place in Belgium and are organised by a racing association approved by the competent federation (article 43/4, §5, 2°). The fact that booksellers

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are allowed to accept bets is inspired by purely economical considerations. As such their business interest is defendable, but it undermines the system of the Act. The idea was – as for the other establishments – to link betting to a specific venue. At the same time however substantial exceptions are being permitted. Although it is still for the executive to establish further requirements booksellers have to comply with (article 43/4, §5, 1°) and although they are not allowed to accept all types of bets, it is not logical that a player can simply enter a news agent with untrained staff instead of a licensed betting agency with licensed employees. Moreover news agents are freely accessible to minors, what implies that – although they are not allowed to actually play – they will already come into contact with betting. It is remarkable that, in contrast to the class I and II establishments not all establishment specific games (in casu betting) have to be provided within a class IV establishment. Consequently, a somewhat strange numerus clausus is put in place. Firstly there is a limit on the number of F1 licensees (article 43/3, §2). Secondly there is a numerus clausus of the number of (fixed and mobile) establishments (article 43/4, §4), as is the case for the class I and II establishments. Given that an F1 licensee can probably operate several establishments, the maximum number of establishments will be higher than the number of licensees F1. The Act does not mention a numerus clausus for F2 licensees. As everyone accepting bets in a class IV establishment is required to possess an F2 licence, it would be logical that the maximum number of F2 licensees matches the numerus clausus of the class IV establishments. We saw however that the acceptance of certain bets outside a class IV establishment also require the possession of an F2 licence. There is no limit for these licences. It follows that a sort of hybrid situation is created for the F2 licences implying there is de facto no numerus clausus. With regard to the numerus clausus for the F1 licensees and the class IV establishments there is a remarkable difference with the other establishments, as the Act itself does not fix the maximum number, but leaves this decision to the executive. A Royal Order will determine the exact number and the criteria to use for the dispersion of these establishments (article 43/3, §2). The distinction that is made here with the other establishments lacks a clear motivation and marks a regrettable evolution. Such a decision should be left to the legislature, certainly given the case law of the Court of Justice that points out that it is important to justify the chosen number of licences or establishments in a numerus clausus. As far as betting on horse races is concerned, betting on those which take place in Belgium and are organised by a racing association approved by the competent federation both totalisator betting (article 43/2, §1, 1°) and fixed or conventional odds betting (bookmaker) (article 43/2, §1, 3°) are allowed. Totalisator betting can only be provided by or with the permission of the racing association organising the race (article 43/2, §2, 1°). Bookmakers on Belgian races are only allowed on the race track, with the authorisation of the organising

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racing association (article 43/2, §2, 3°). Besides betting on domestic horse races, which is a rather marginal activity, totalisator betting on horse races taking place abroad is also allowed (article 43/2, §1, 2°) as well as bets on horse races that take place abroad, either in accordance with the results of totalisator betting, or by the conventional odds to which the parties refer (article 43/2, §1, 4°). The totalisator betting on foreign horse races can only be organised by authorised Belgian racing associations (article 43/2, §2, 2°). It follows that these associations control the entire totalisator betting. The conditions to provide totalisator betting on horse races taking place abroad will be fixed in a Royal Order. Attention could thereby be paid to participation of the Belgian bettors in the collective mass of stakes of e.g. the French PMU. That is much more attractive than prize money limited to the stakes of the Belgian players only. The acceptance of the other bets on foreign horse racing is restricted to the fixed class IV establishments (article 43/2, §1, 4°). 3.1.2. Media Games The Gambling Act will from now on regulate all media games. The exception for call-in television quizzes is removed from the Act. A media game is every game of chance operated via the media (article 2, 9°). The Act defines ‘media’ as ‘any radio or television station and any newspaper or periodical for which the headquarters of the operator/publisher is established in the European Union’ (article 2,8°). Media games are – due to their nature – not linked to an establishment. For their provision a G type licence is required and, as in the case of the F licence, two types exist. On the one hand there is the G1 licence that allows, for renewable periods of five years, the operation of games of chance in televised programmes which form a complete game (call-in television quizzes) (article 25, 8 and 43/12). On the other hand there is the G2 licence that for the period of one year allows the operation of all other games of chance via the media (article 25, 9 and 43/14).28 A considerable part of the regulation is left to an implementing order (articles 43/13 and 43/15). For the televised programmes which form a complete show reliance will probably be placed largely upon the Royal Order of 12 May 2009. For the G2 licence it is provided that the executive will determine the games that do not need a licence (article 43/15, 6). The executive thus receives the power to create exceptions on the legal prohibition to offer gambling without a licence. Although it concerns an exception to a penalisation, it should be noted, in the light of the principle of the legality of criminal offences and punishments, that

28 It is odd that in the Act’s new provisions at several places the words ‘games of chance via the media’ are used, while the Act introduced the notion of ‘media game’. This notion becomes superfluous in that way; the definition of ‘media’ suffices. 162



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such legislative competence should not be delegated too much and broadly to the executive.29 It is logical that the media games are finally regulated by the Gambling Act and will be brought within the licensing system. The regulation is however very ad hoc and largely confirms the prevailing situation. A distinction is made between call-in television quizzes and all other games, because the quizzes have been regulated since the 2006 Royal Order. It would however been much more logical – supposing that it is absolutely necessary to make a distinction – to distinguish between games that form a complete programme and games that are incidental to the show or publication, irrespective of the medium. The current distinction does not sufficiently take into account future evolutions, a shortcoming that also plagues the definition of ‘media’. It is not inconceivable that in a few years complete gambling programmes via other means of distance communication than television will become extremely widespread. These shows would require a G2 licence then and not a G1 licence that will probably be subject to more and stricter conditions. While the degree of danger of media games to a large extent depends on its length; a programme completely dedicated to quizzes would more likely involve a higher risk than a short quiz or small competition within a programme. 3.1.3. Gambling through Information Society Instruments The Act also regulates gambling via information society instruments for the first time, which brings of course directly the internet into mind. ‘Information society instruments’ encompass more forms of communication than just the internet however. It refers to the definition of ‘electronic means’ of Directive 98/34/ EC30: ‘electronic equipment for the processing (including digital compression) and storage of data which is entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means’ (article 2, 10°). Such a broad definition is a better option than the too specific definition of ‘media’ – it allows some margin to regulate future technological phenomena that are currently unknown. For the purpose of simplicity, in the next paragraphs mainly reference to the internet will be made. The licence system for gambling through information society instruments – the major innovation in the Act – is regulated in exactly one article (article 43/8). A very elaborate implementing order will be necessary to transpose this

29 Van den Wyngaert, C., Strafrecht, strafprocesrecht & internationaal strafrecht (Antwerp/ Apeldoorn: Maklu, 2006), p. 83. 30 Directive 98/48 amending Directive 98/34/EC laying down a procedure of information in the field of technical standards and regulations (Information Society Directive), [1998] OJ L 217/18. 163

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provision into practice.31 The preference to regulate the details in a Royal Order is as such defendable. A very technical matter is concerned that is subject to rapid and continuous evolution. Its regulation thus needs certain flexibility – this can be obtained more easily with an order of the executive than with a formal legislative act. The Belgian legislature opts resolutely for a system of supplementary licences. This means that only operators with a licence for a bricks and mortar gambling establishment will be able to obtain a licence to provide online gambling (article 43/8, §1). The licensees that are eligible for this supplementary licence are holders of class A, B and F1 licences with respectively an A+, B+ and F1+ licence, of which the duration is linked to the validity period of the licence for the establishment (article 43/8, §3). A G licensee cannot apply for a supplementary licence, which seems to be logical because the nature of media games implies that they are already provided via a certain medium. Criticism is however possible because the content of certain media games is also apt to be offered via the internet, e.g. on the website of the broadcasting company. Moreover the question arises whether a supplementary licence is not required to provide gambling by means of digital television. Was the decision to prohibit offers via digital television deliberately taken or was the issue simply forgotten in the discussion of the bill? The supplementary licence can only relate to the games that are being offered in the corresponding bricks and mortar establishment (article 43/8, §1). An F1 licensee can thus only obtain an F1+ licence and provide online betting with this licence and no other forms such as poker. Every licensee can only obtain one supplementary licence, even if he possesses several gambling establishments. That is quite obvious, as one only needs one licence to cover the entire internet. The requirement to have a physical establishment on the Belgian territory is burdensome and potentially incompatible with Community law. Furthermore the question arises as to whether this division in types of games is realistic. A casino will probably be able to offer a more or less full website with virtual casino games, including poker, and a website only providing betting is also conceivable. But which games will a class B licensee be allowed to offer? Will this offer be sufficiently attractive? That question is not only important for the economic viability of the operator, but also for the channelling policy the Belgian Government pursues. After all, the aim is to entice players away from the illegal circuit towards the safe, licensed gambling sites. This however implies that the legal offer is attractive. Does a website only offering games similar to those in a gaming machine hall have the required attractiveness? Or if a player has to choose between a website with only betting and a website with the full range of games, from poker to betting, will he be inclined to choose the first?

31 Which raises criticism: Bill 2009, Rapport fait au nom de la Commission de la Justice, Doc. Parl. House, 52-1992/006, pp. 88. 164



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A Royal Order will determine the precise modalities of supervision and control of gambling through information society instruments, but a minimum condition that can already be found in the Act itself is that the servers on which the data and the structure of the website are managed are located in a permanent establishment in Belgium (article 43/8, §2, 3°). The presence of the server on Belgian territory provides the opportunity to take action on a technical level and to control data at the source. It is generally acknowledged that the latter is vital for a reliable and full control.32 The question remains however to what extent the shutting down of the server in Belgium will effectively take the website offline. The operator could have servers in other countries and websites are often copied to so-called mirror sites and remain accessible in that way. Apart from this problem a far greater problem is that this location requirement does not offer a solution for the many foreign websites that are illegal according to Belgian law. To bar these sites effectively the support of third parties, like Internet Service Providers and credit card companies, is probably required. These parties are put under criminal liability by article 4, §2 that prohibits to facilitate the operation of gambling in case one should know that the gambling is not authorised by the Act. That shift of responsibility from the State to private organisations with regard to the enforcement of laws concerning the internet can be noticed in several countries. In fact it shows the inadequacy of the traditional methods of enforcement.33 Given the fact that not only ISPs and bank companies risk criminal prosecution but also players that participate in illegal gambling a system is necessary to inform these parties as to which operators are prohibited. On the one hand players need to be informed about what is legal and what not. The Royal Order will have to detail who has to provide this information and what it has to contain exactly (article 43/8, §2, 5°). On the other hand the Gaming Commission will keep a list of the supplementary licences granted (a ‘white list’) that will be made available to anyone who wishes to consult it (article 43/8, §4). Are the ISPs under an obligation to consult the list and shut down all traffic from and to sites that are not on the list? The Bill seems to provide that they will be asked to make illegal content unavailable,34 which implies that they will not have to take action on the basis of their own initiative.

32 De Vocht, P., Observaties over het wetsontwerp tot wijziging van de wet van 7 mei 1999 op de kansspelen, written observations submitted during the hearing in the House of Representatives on 23 June 2009, p. 2. 33 Cf. de Koning, M., ‘Kansspelen op internet: een spelletje blufpoker?’, Computerrecht, (2009), p. 113. 34 Bill 2009, p. 10. 165

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3.2. Gaming Commission The Gaming Commission does not only grant the licences, it also controls the licensees. The Commission already had the competence to sanction licensees (e.g. suspension or withdrawal of the licence) – this possibility is left intact (article 15/2). However, in case non-licensees violated the Gambling Act the Commission could do nothing more than inform the ‘procureur des Konings’ (Crown prosecutor) of an infringement (article 15, §2, subsection 1). The decision to take action against the illegal operator relied solely on the competence of the judiciary. It became obvious rather quickly that illegal gambling was not a priority of the judicial authorities. The most important innovation with regard the Commission is therefore that from now on it can proceed – in certain cases – to the imposition of (administrative) fines itself. A safety net is created so to say, for the cases where the public prosecutor decides not to take action for certain reasons. In case the Crown prosecutor decides not to follow up the facts (e.g. because of no priority) the Gaming Commission can come to the fore again (article 15/1, §1).35 It can impose administrative fines, also to non-licensees (article 15/3, §1). The Act provides a procedure giving the party in question the opportunity to put forward his defence in front of two members of the Gaming Commission and the Commission’s chairman (articles 15/4 and 15/5). The final decision is taken by the Commission in full and is motivated (article 15/6, §2). 3.3. Player Protection Access to casinos and gambling machine halls was prohibited under the age of 21 and playing in class III establishments under the age of 18. For the class IV establishment and betting a minimum age of 18 has been opted for (article 54, §1). For gambling via information society instruments a distinction is made between betting and other forms of gambling, analogous to that applicable to the physical venues. Participation in the first is prohibited for those under 18, in the latter under 21. The idea behind this distinction is that the second category of gambling is deemed to present a higher risk than the first.36 As mentioned above Belgium is progressive in the system of self-exclusion of the player and in the monitoring by electronic means of compliance with the list of excluded gamblers. The amendment extends the access exclusion that already existed for class I and II establishments to betting agencies and the gambling provided via information society instruments. The player cannot only be excluded at his own request (article 54, §3, 1), since certain categories of

35 This will not apply where there are insufficient grounds for a charge to be made. The case is closed then without the possibility for the Gaming Commission to reopen it. 36 Bill 2009, p. 44. 166



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individuals are automatically banned, such as those who, whilst having attained the age of majority are not extended the full legal rights associated with this, due to mental incapacity (article 54, §3, 3). These already existing possibilities were however deemed to be insufficient. It was considered that persons close to the player, such as relatives and friends, should also have the opportunity to ask for the player’s exclusion in cases where the player neglects to do so himself and where exclusion would be advisable. Therefore the modified Act effectively provides the possibility to request the Gaming Commission to impose an exclusion order on an addicted gambler (article 54, §2, 5). The request is open to every interested party, but has to be motivated. The Gaming Commission then takes a decision after having heard the player. This is an understandable measure that might save a lot of harm for the individual concerned and their family. For it is not only the player that suffers from a gambling addiction – also those in his direct environment are often harmed. The Gambling Act contained from the beginning a prohibition to grant the player any credit, with as sole exception the use of credit cards in casinos (article 58, subsection 1). This prohibition is extended now to class IV establishments and gambling via information society instruments (article 58, subsection 2). Media games are not mentioned, probably because only staking by means of the price of a telephone call or a SMS was imagined for this type of games. If the implementing order actually will only allow this type of payment and will prohibit credit cards then there is no problem of course. If not, the legislature will have – once again – wrongly anticipated possible evolutions. With regard to online gambling it is striking that the amended act completely prohibits the use of credit cards. Firstly this does not fit into the bill’s logic that the virtual world mirrors the real world, because in casinos the use of credit cards is allowed. Secondly this does not seem to be in line with economic reality. Other means of online payment exist of course, like e-wallets such as Paypal. Once again however a well-intended measure seems to price the Belgian websites out of the market, thus harming the ultimate aim of a channelling policy, namely attracting all players to the legal circuit. To conclude a last remark deserves to be made about the player that does not directly involve his protection. For the first time in Belgian gambling history players who knowingly participate in illegal gambling will be criminally liable (article 4, §2). It is hoped that this will dissuade the player from engaging in what Belgian legislation considers to be illegal gambling, which in the end hurts the (illegal) operator.37 How realistic an actual prosecution of such players will be is questionable – emphasis seems to be mainly put on the dissuasive effect of the mere existence of the provision.

37 Bill 2009, p. 18. 167

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4. The New Gambling Act in European Perspective An increasing number of operators offer gambling over the internet, which raises the question whether a Member State can prohibit activities offered online from other Member States. Also operators of ‘traditional’ offline gambling licensed in one Member State and willing to offer the same offline services in another are unsure what the value of the licence of their home Member State is. Both concerns are linked with the issue of the provision of cross-border gambling, which automatically turns the focus of attention towards EU law. As the provision of gambling is considered to be a within the meaning of the EC Treaty,38 Community legislation could have an influence on the gambling policy of Member States. The amended Belgian Gambling Act introduces strict requirements for operators wanting to offer certain gambling services to Belgian consumers. Some of these requirements restrict the freedom to provide services. This automatically raises the question of the compatibility of the Gambling Act with the free movement principles in the EC Treaty. Gambling law being a very sensitive area, this question can only be answered in a nuanced way, following the guidelines the Court of Justice (hereafter ECJ) has drawn up in a number of cases. Especially the problem of mutual recognition has caused a fierce debate between private operators defending this principle and Member States and monopolists denying its application in the field of gambling. Can an operator licensed in one Member State offer his gambling services in another Member State without the need to apply for a licence in the Member State of destination? A recent decision of the ECJ provided new insights in this difficult matter. The impact of the European context on the modified Belgian Gambling Act will be considered in the following paragraphs. On the one hand there is the issue of the compatibility of the amendments with the basic freedoms and their interpretation by the ECJ. This will be investigated taking into account the most recent decisions of the ECJ with a focus on the problem of mutual recognition. On the other hand the impact of other Community law, and more specifically certain Directives, also has to be examined. This will be considered first, after a short overview of the European framework for gambling. 4.1. The European Framework for Gambling For an elaborate presentation and discussion of the gambling framework within EU law, the reader is referred to other contributions in this book.39 We can suffice

38 Case C-275/92, Her Majesty’s Customs and Excise v. Gerhart Schindler and Jörg Schindler, [1994] ECR I-1039, paras. 25 and 34. 39 See the contributions by Littler, A., ‘Gambling in the European Union’, Franssen, J. and Tolboom, F., ‘Practical Implications of the Santa Casa Judgment’ and Vlaemminck, P., ‘Is There a Future for a Comprehensive EU Gambling Services Policy?’ in this volume. See 168



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here with some general remarks that are relevant for the appreciation of the conformity of the amended Belgian Gambling Act with EU law. The regulation of gambling belongs to the competence of the Member States, but it is noticeable that all European institutions are showing a growing interest in this matter. The European Parliament adopted a resolution on the integrity of online gambling during its previous term40 and both the French and the Swedish Presidency of the Council took initiatives with the drafting of reports41 and the installation of the Council Working Party on Gambling and Betting.42 The European Commission43 was however the first to tread on the gambling field with – a by now long series of – infringement proceedings opened against several Member states.44 It also commissioned an elaborate study on gambling services in the internal market which was delivered in 2006.45 The Community could decide to take action in the field of gambling and thus repeal its decision dating back to 1992 not to take positive action to harmonise

also: Littler, A., ‘Regulatory Perspectives on the Future of Interactive Gambling in the Internal Market’, Eur. L. Rev., 33 (2008), 211–229. 40 European Parliament Resolution of 10 March 2009 on the integrity of online gambling, 2008/2215(INI). See also: Committee on the Internal Market and Consumer Protection, Report on the Integrity of Online Gambling (C. Schaldemose), 17 February 2008, 2008/2215(INI). 41 Progress Report of the French Presidency of the EU, Gambling and betting: legal framework and policies in the Member States of the EU, 27 November 2008, 16022/08 and Progress Report of the Swedish Presidency of the EU, Legal framework for gambling and betting in the Member States of the European Union, 25 November 2009, 16571/09 (For the Swedish Presidency Report see the contribution of Heldahl, E., ‘The Perspective of the Swedish Presidency on the Issue of Gambling’ elsewhere in this book.). 42 . 43 For an overview: Vagnhammar, E.B., ‘The Proper Functioning of the Internal Market: Observations from Brussels’, in Spapens, T., Littler, A. and Fijnaut, C. (eds.), Crime, Addiction and the Regulation of Gambling (Leiden/Boston: Brill, 2008), 55–67. 44 Free movement of services: Commission inquires into restrictions on sports-betting services in Denmark, Finland, Germany, Hungary, Italy, the Netherlands and Sweden, IP/06/436 of 4 April 2006; Free movement of services: Commission inquires into restrictions on the provision of certain gambling services in Austria, France and Italy, IP/06/1362 of 12 October 2006; Free movement of services: Commission inquires into restrictions on the provision of certain gambling services in Sweden, IP/08/118 of 31 January 2008 and Free movement of services: Commission inquires into restrictions on gambling services in Germany, IP/08/119 of 31 January 2008 respectively. 45 Swiss Institute for Comparative Law, Study of Gambling Services in the Internal Market of the European Union, Final Report, June 2006, . In fact, the Commission already had a first study done in 1991: Gambling in the single market: a study of the current legal and market situation. 169

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the regulation of gambling.46 Given the considerable proliferation of the internet in recent years and the substantial regulatory challenges this causes, time might have come to review that decision.47 The Community may, according to the subsidiarity principle, only take action in this non-exclusive matter, if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community (article 5 EC). Both the decentralisation criterion (‘the Community acts only if the proposed objectives cannot be sufficiently achieved by the Member States’) and the efficiency criterion (‘the objectives can be better achieved by the Community’)48 seem to be met to allow Community action in this matter. The transnational aspect of – especially online – gambling keeps causing problems that do not seem to be solved in an optimal way through a purely national approach. However, until now gambling has not been subject to harmonisation on a European level and no positive action will be taken in the short term. The few directives that do not exclude gambling from their scope of application do not have a substantial influence on the regulation of gambling.49 In any case they do not contain any provisions on the country of origin principle or principles with a similar effect of reducing the regulatory power of a Member State on incoming goods and services to the detriment of the regulation of the Member State of establishment. There is a clear denial of the application of these principles to gambling, as shown by the exclusion of gambling in all important directives containing provisions on home country control.50 In the absence of harmonisation,

46 European Council, Conclusions of the Presidency, Edinburgh 11 and 12 December 1992, DOC/92/8, 13 December 1992. 47 Littler, supra note 39, p. 228. 48 Lenaerts, K. and Van Nuffel, P., Constitutional Law of the European Union, (London: Sweet & Maxwell, 2005), 103, 5-030. Craig, P. and De Burca, G., EU Law, (Oxford: Oxford University Press, 2007), 103. 49 E.g. Directive 97/7 on the protection of consumers in respect of distance contracts (Distance Selling Directive), O.J. 1998, L 144/19; Directive 98/48 amending Directive 98/34/EC laying down a procedure for the provision of information in the field of technical standards and regulations; Directive 2002/58 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications), [2002] OJ L 201/37. 50 Art. 1(5)(d) Directive 2000/31 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’), [2000] OJ L 178/1; cons. 18 Directive 2007/65 amending Council Directive 89/552 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities, [2007] OJ L 332/27; art. 2, 2, h) Directive 2006/123 on services in the internal market, [2006] OJ L 376/ 36. 170



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the Member states only have to take the primary EU law into account.51 4.2. The Belgian Gambling Act and EU Secondary Law Before discussing the compatibility of the Belgian Gambling Act with the Treaty provisions, a brief look should be taken at the influence of certain directives on the validity of the amended Belgian legislation.52 Firstly there is the Information Society Directive that obliges Member States to notify all technical standards and regulations applicable to services delivered by electronic means. This allows the European Commission and other Member States to express remarks regarding the compatibility of the draft measure with EU law. There is only an obligation to notify, not to amend the draft legislation in order to meet the concerns uttered, although a Member State could of course face an infringement proceeding for breach of Community law once the national legislation comes effectively into force. The Information Society Directive thus has more of a preventive effect. The Belgian government correctly notified its bill to the Commission and received remarks from the Commission and Malta.53 This mere notification is sufficient to comply with the Directive. Secondly, the Distance Selling Directive is also applicable to gambling, except for the right of withdrawal (article 6, 3). The Directive aims to harmonise some basic consumer protection requirements in business-to-consumer contracts concluded via means of distant communication. As such it has no influence on the harmonisation of gambling law itself as it does not contain any provisions on the cross border trade of gambling services. This does however not imply that the transposition of the Directive into national law does not contain elements that can be of importance for some particular rules in the Belgian Gambling Act. The provisions of this Directive were transposed in Belgium by the Market Practices Act54 which thus also applies on the contracts concluded between the player and the operator of online gambling. In the amended Gambling Act there was no specific attention paid to stricter contractual consumer protection requirements than those contained in the Commercial Practices Act, but this

51 Cf. Opinion of Advocate General Colomer, Placanica, points 144–149. 52 The Third Money Laundering Directive (Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, [2005] OJ L 309/15) will not be discussed. Although explicitly applicable to casinos, this matter was already dealt with in previous amendments of the Belgian gambling regulation. 53 . 54 Loi of 6 April 2010 relative aux pratiques du marché et à la protection du consommateur MB 12 April 2010. 171

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could change following the Royal Order in pursuance of the article on gambling through information society instruments. Lastly, the recent Audiovisual Media Services Directive (AVMS Directive) which amends the Television Without Frontiers Directive (TWF Directive)55 deserves attention. The Directive regulates the harmonisation of services under the editorial responsibility of a media service provider and of which the principal purpose is the provision to the general public of programmes by electronic communications networks in order to inform, entertain or educate. Both television broadcast and on-demand audiovisual media services are concerned (article 1(a)). The Directive retains the idea of the TWF Directive, with common minimum standards and the use of the country of origin principle (article 2 and recital 27) for the named media services. According to the preamble of the AVMS Directive gambling is excluded from its scope (recital 18), because the principal purpose of most gambling services is not the provision of a programme – the audiovisual content (e.g. the use of footage of a sports event on a betting website) is merely incidental to the service.56 The exclusion cannot literally be found in the operational provisions of the Directive itself, but is implied in the use of the notion ‘programme’ (article 1(b)). This means however that a contrario a programme containing gambling does fall under the provisions of the Directive (see also recital 18). The television programmes aimed at with the G1 and G2 licence in the Belgian Gambling Act are thus subject to this Directive. As the regulation of the media is a competence of the linguistic communities in the federal state of Belgium two decrees, one in the Dutch speaking part and one in the French speaking part, contain the standards broadcasting companies established in Belgium have to comply with.57 Two questions have to be tackled in this matter. One concerning the legislation applicable to the broadcasting companies established in Belgium and a second concerning the position of broadcasting companies established in another Member State planning to direct gambling programmes to Belgian consumers.58

55 Directive 89/552 on the coordination of certain provisions laid down by Law, Regulation or Administrative Action in Member States concerning the pursuit of television broadcasting activities, [1989] OJ L 298/23. 56 Littler, A., ‘Un point de vue européen sur la proposition d’amendement de la loi sur les jeux de hasard’, in Hoekx, N. and Verbeke, A.L. (eds.), Kansspelen in België/ Les jeux de hasard en Belgique (Brussels: Larcier, 2009), p. 34. 57 Decreet of 27 March 2009 betreffende radio-omroep en televisie, MB 30 April 2009 and Décret modifiant le décret of 27 February 2003 sur la radiodiffusion and décret of 9 January 2003 relatif à la transparence, à l’autonomie et au contrôle des organismes publics, des sociétés de bâtiments scolaires et des sociétés de gestion patrimoniale qui dépendent de la Communauté française, MB 18 March 2009. 58 The Directive gives criteria to determine the Member State of establishment (article 2, 3), as this was a point of discussion before an amendment of the TWF Directive (Case C-56/96, VT4, [1997] ECR I-3143). 172



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The providers of audiovisual media services established in Belgium have to comply with the media regulation of the linguistic community in which they are established. It follows that they are already subject to a thorough control by a media regulation agency with regard to the standards put forward by the regulation transposing the AVMS Directive. Are there any provisions in this regulation that have a direct impact on the content of the programmes containing media games? This seems to be the case, as the quiz programmes that will need a G1 licence could according to the ECJ be qualified as ‘teleshopping’ (article 1(f) AVMS Directive) if that broadcast or part of it represents a real offer of services having regard to the purpose of the broadcast of which the game forms part, the significance of the game within the broadcast in terms of time and of anticipated economic effects in relation to those expected in respect of that broadcast as a whole and also to the type of questions which the candidates are asked.59 The Vlaamse Regulator voor de Media (Flemish Media Regulator) has adopted the point of view that these games are in fact teleshopping and thus have to comply with the relevant provisions on this matter in the media regulation.60 However, this cannot be said from the media games that only require a G2 licence and are incidental to the broadcasted programme. To be considered as teleshopping, the game has to constitute an actual economic activity in its own right involving the supply of services and not to be restricted to a mere offer of entertainment within the broadcast.61 Under certain circumstances these game could be qualified as television advertising (article 1(c)).62 This implies that they have to comply with the relevant provisions on this subject. As the games of type G1 and some of type G2 already have to comply with these specific requirements of media law, is there any room left for a control by the Gaming Commission? This is certainly the case. The provisions of the Gambling Act and its Royal Orders will focus on the gambling aspect of the programme: What are the stakes? How should vulnerable players be protected? Is the selection random? etc. These aspects are not prevalent in the media regulation and moreover not all games of type G2 will fall under specific protection measures of the media regulation, as shown above. The regulation of gambling is a competence of the Federal State63 and there is no overlap with the regulation of media in this case. There is no inconvenience

59 Case C-195/06, Kommunikationsbehörde Austria (KommAustria) v. Österreichischer Rundfunk (ORF), [2007] ECR I-8817, para. 47. 60 . 61 KommAustria, para. 37. Cf. Case C-368/95 Familiapress, [1997] ECR I-3689, para. 23. 62 KommAustria, paras. 41–45. 63 Constitutional Court, case 114/2005, B.15, . 173

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in applying both the federal and the linguistic community legislation to G1 and G2 licensees.64 The second question touches upon a very sensitive issue. The existence of a Directive containing the country of origin principle raises the problem as to what the obligations are of a broadcasting company established and controlled in another Member state and (also) targeting a Belgian audience. Does it have to apply for a G1 and/or G2 licence or does compliance with the regulation in its home country suffice? The idea of the Directive is that only one Member State should have jurisdiction over an audiovisual media service provider (recital 28). Member States have to ensure the freedom of reception and shall not restrict retransmissions on their territory of audiovisual media services from other Member States (article 2a (1) amended Directive). For on-demand audiovisual services Member States can however derogate from this principle for reasons of public policy and consumer protection (article 2a (4)). In that case Belgium can require media services providers from other Member States to apply for a licence, assuming that the licence conditions are proportionate. However television broadcasting, and thus the call-in quizzes, is not included within this exception provided by the Directive. The question for these broadcasts is whether the focus is on gambling – which the Directive does not cover – or on the free transmission of television programmes – which is subject to the Directive’s country of origin principle. The least burdensome measure to satisfy both to some degree would be the requirement for the foreign provider to block participation from Belgian residents. Transmission of his programme is thus guaranteed. It is however not sure whether such a measure would be sufficient to meet the objectives of the Gambling Act in the strict view of the Belgian gambling regulator. It could therefore be argued that the AVMS Directive does not apply to the gambling activity as such, and that moreover in non coordinated areas a receiving country may derogate from the country of origin principle in case a compelling general interest of a non-economic nature is at stake.65 All Member States regulate audiovisual media services, but not all Member States will have a regulation in place for call-in quizzes. It is therefore not illogical that the country of origin principle does not apply with regard to the licensing of media games. This would imply that a broadcasting company established in another Member State has to apply for a licence under the Gambling Act if it wants to use gambling in its programmes.

64 Confirmed by the Flemish Media Regulator when it states: ‘Besides the federal legislation the broadcast of a ‘belspel’ on television by a Flemish broadcasting company has to respect also the Flemish media regulation concerning teleshopping.’ (). 65 Castendyk, O., Dommering, E. and Scheuer, A., European Media Law (Alphen a/d Rijn: Kluwer International, 2008), 849. 174



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4.3. Conformity of the Belgian Gambling Act with the Treaty 4.3.1. Gambling and the Relevant Treaty Provisions in the ECJ’s Jurisprudence 4.3.1.1. Evolution of the Case Law When drawing up gambling legislation Member States have to take the primary EU law into account. The ECJ made clear that both the freedom of establishment (article 43 EC) and the free movement of services (article 49 EC) can be applicable to gambling operators,66 also on those providing their services online without leaving their Member State of establishment.67 Member States wanting to install a system with a limited number of gambling operators are restricting one of these or both freedoms. For this restriction to be justified under Community law certain conditions have to be fulfilled. Over the years the ECJ has clarified these conditions and seemed to take a more restrictive approach towards the Member States, leaving them less discretion. In the last case where the Court took a decision, the Santa Casa case, the ECJ however seems to give the Member States again more room. A short overview of the ECJ’s position is necessary, but a full discussion can be found elsewhere in this book.68 Initially reticent, the ECJ’s case law became increasingly explicit and subtle, culminating in the Placanica judgment.69 The justification of the restrictions took an increasingly prominent place, as did the proportionality of the restrictive measures. Up until Gambelli the ECJ was satisfied with the purely formal existence of grounds for justification for the restriction of gambling services. A Member State wanting to limit the number of operators and thus restrict the free movement of services could do so if an imperative requirement in the general interest formally exists, such as consumer protection, the prevention of fraud and incitement to squander on gaming, and the prevention of social problems in general.70 Only reducing tax revenue or financing social activities through a levy

66 Case C-243/01, Criminal Proceedings against Piergiorgio Gambelli and Others, [2003] ECR I-13031, paras. 46 and 48. 67 Gambelli, para. 54. 68 See also: Littler, supra note 39, pp. 217–221.; Hoekx, N., ‘Placanica: combating criminality vs reducing gambling opportunities as grounds for justification in the ECJ’s jurisprudence’, in Spapens, T., Littler, A. and Fijnaut, C. (eds.), Crime, Addiction and the Regulation of Gambling (Leiden/Boston: Brill, 2008), pp. 71–84. 69 Case C-338/04, C-359/04 and C-360/04 Criminal proceedings against Massimiliano Placanica, Christian Palazzese and Angelo Sorricchio, [2007] ECR I-01891. 70 Case C-124/97, Markku Juhani Läärä, Cotswold Microsystems Ltd and Oy Transatlantic Software Ltd v. Kihlakunnansyyttäyä (Jyväskylä) and Suomen valtio (Finnish State), [1999] ECR I-6067, paras. 32–33; Case C-67/98, Questore di Verona v. Diego Zenatti, [1999] ECR I-7289, paras. 30–31; Gambelli, para. 67. 175

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on the proceeds of authorised games of chance were not accepted as grounds for justification.71 The ECJ held that Member States should be left with a sufficient degree of latitude to determine what is required to protect players and maintain order in society.72 Members States had a broad margin of discretion under that case law to shape their gambling policy. It is only with Zenatti that the ECJ became more demanding: national gambling legislation that is justified by social-policy objectives must in actual fact be intended to limit the harmful effects of such activities.73 It is for the national court to verify whether the restrictive national legislation is genuinely directed to realising the objectives which might justify it.74 It was however Gambelli that truly narrowed down the Member States’ margin of discretion with the emphasising of the proportionality test.75 National measures that impose restrictions on gambling must satisfy the four conditions of the Gebhard test:76 1) they must be applied in a non-discriminatory manner; 2) they must be justified by imperative requirements in the general interest; 3) they must be suitable for securing the attainment of the objective which they pursue; and 4) they must not go beyond what is necessary in order to attain it.77 The suitability of restrictive measures implies that the restrictions have to serve to limit gambling activities in a consistent and systematic manner.78 The ECJ made it clear that a policy of expansion in the gambling sector is inconsistent with the protection of society as justification for the restriction of the freedoms guaranteed under the EC Treaty.79 The ground of justification is unrealistic under those circumstances. In Lindman the Court also indicated that the Member State must substantiate the reasons invoked by way 71 Schindler, para. 60; Zenatti, para. 36; Gambelli, paras. 61–62. 72 Schindler, para. 61; Läärä, para 35; Zenatti, para. 33; Anomar, para. 87. 73 Zenatti, paras. 36 and 38; Gambelli, para. 62; Opinion of Advocate General Fennelly, Zenatti, point 32. 74 Zenatti, para. 37; Gambelli, para. 75. 75 Barnard, C., ‘Derogations, Justifications and the Four Freedoms: Is State Interest Really Protected?’, in Barnard, C. and Odudu, O. (eds.), The Outer Limits of European Law, (Oxford: Hart, 2009), pp. 284–285; Littler, A., ‘Has the ECJ’s Jurisprudence in the Field of Gambling Become More Restrictive when Applying the Proportionality Principle?’, in Littler, A. and Fijnaut, C. (eds.), The Regulation of Gambling: European and National Perspectives (Leiden: Martinus Nijhoff, 2006), p. 38; Heremans, T. and De Meester, B., ‘Advocaten en gokkers, vakbonden en banken: rien ne va plus?’, in Lenaerts, K. and Wouters, J. (eds.), Themis Internationaal en Europees Recht (Bruges: die Keure, 2008), pp. 25–26. 76 Case C-55/94, Reinhard Gebhard v. Consiglio dell’Ordine degli Avvocati e Procuratori di Milano, [1995] ECR I-04165, para. 37. 77 Gambelli, para. 65; Lindman, para. 25; Placanica, para. 49; Steiner, J., Woods, L. and Twigg-Flesner, C., EU Law (Oxford: Oxford University Press, 2006), p. 457. 78 Gambelli, para. 67. 79 Gambelli, para. 69. 176



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of justification.80 Placanica brought an important nuance to Gambelli by pointing out that the justifying objective of combating crime by making operators subject to control and channelling the gambling activities into controlled systems is – contrary to the objective of limiting the availability of gambling – compatible with a policy of expansion, with players being drawn away from clandestine betting and gaming into a controlled system.81 4.3.1.2. Mutual Recognition The case law from Schindler to Placanica clarified that Member States have the possibility to restrict the gambling offer on their territory. Whether they prefer to do this by means of a general prohibition, a monopoly or a licence system is left to their discretion. The only concern is that the chosen system is justified and proportionate. What the case law however left in the middle up until recently was the issue of the value of licences from another Member State. In this restricted environment, is there an advantage for an operator holding a licence from another Member State? Can an operator with a licence from e.g. the UK offer his services freely in Belgium? In other words, is mutual recognition of licences obliged in the field of gambling? This is a very important question, in the heart of the realisation of the internal market. In Gambelli and Placanica the intermediaries that were condemned in Italy for offering gambling without an Italian licence were working for a UK based and licensed operator who was excluded from the tender procedure for Italian betting licences. According to the Advocates-General in Gambelli and Placanica the licence of the Member State of establishment should be taken into account by the Member State of provision of the service and double regulatory burdens should be avoided. If an operator originating from another Member State meets the requirements applicable in that State, the national authorities of the Member State in which the service is provided should accept that as a sufficient guarantee of the integrity of the operator.82 The ECJ however never made an explicit statement on this issue, besides a cautious reference in Gambelli. It advised the national court that when assessing the principle of proportionality, it should take into account the fact that the supplier of the service is already subject in his Member State of establishment to a regulation entailing controls and penalties.83 A similar reasoning can be found in the Ladbrokes case before the

80 Lindman, para. 26. 81 Placanica, para. 55; Opinion of Advocate General Colomer, point 38. For a discussion of both grounds for justification: Hoekx, supra note 1, 79–83. 82 Opinion of Advocate General Colomer, Placanica point 130; Opinion of Advocate General Alber, Gambelli point 118. 83 Gambelli, para. 73. Cf. Case 279/80, Criminal Proceedings against Alfred John Webb, [1981] ECR 03305, para. 17. 177

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EFTA Court.84 This does not imply that an operator licensed in another Member State is exempted from the tender procedure for licences in the Member State of provision of the service, but some requirements already fulfilled and controlled in the Member State of establishment should be left aside. In the recent Santa Casa case however the Court gives for the first time an explicit view on the mutual recognition of licences of another Member State than the one where the gambling services are provided.85 The peculiar nature of the case may however not disappear from sight to correctly assess the scope of the decision. In this Portuguese case a monopoly on, among others, online lotteries and online sports betting was confronted with an operator established and licensed in another Member State offering online betting to Portuguese citizens and sponsoring the Portuguese soccer league. The operator was fined (by the monopolist itself!) for breaching the monopoly. The national judge having to assess the appeal of the operator against the fine referred two preliminary questions to the ECJ questioning the compatibility of the monopoly with Community law. The ECJ makes it clear, in keeping with its previous case law, that as such the choice for a monopoly instead of another system is solely the case of the Member State, enjoying the necessary discretion in the light of the objectives it pursues.86 The legislation implementing this policy choice of course has to comply with the EC Treaty and the requirements made explicit in the Court’s case law. The ECJ does not go very deep into the question whether the monopoly is justified and proportional. It seems to accept this rather easily.87 It does however make a clear statement on the issue of recognition of licences from other Member States. It states that ‘the sector involving games of chance offered via the internet has not been the subject of Community harmonisation. A Member State is therefore entitled to take the view that the mere fact that an operator such as Bwin lawfully offers services in that sector via the internet in another Member State, in which it is established and where it is in principle already subject to statutory conditions and controls on the part of the competent authorities in that State, cannot be regarded as amounting to a sufficient assurance that national consumers will be protected against the risks of fraud and crime, in the light of the difficulties liable to be encountered in such a context by the authorities of the Member State 84 EFTA Court, Case E-3/06, Ladbrokes Ltd. v. The Government of Norway, Ministry of Culture and Church Affairs and Ministry of Agriculture and Food, , para. 86. 85 For a detailed analysis of the case: Hoekx, N., ‘Kansspelen op het internet: heeft Bwin vs. Santa Casa de kaarten geschud?’, DCCR (2009), 60–70. 86 Santa Casa, para. 57. Schindler, para. 32, Placanica, para. 47. 87 Santa Casa, para. 67. The EFTA Court seems to be more demanding on this issue: Ladbrokes, para. 59. 178



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of establishment in assessing the professional qualities and integrity of operators.’88 It is now very clear that an operator with a licence from one Member State can be prohibited by another Member State with a monopoly to offer his services online to the consumers of that Member State.89 The Court seems to reject the idea of mutual recognition of licences in the field of gambling. That conclusion is however not nuanced enough. The ECJ says that when a Member State has a justified monopoly it can prohibit all other operators (whether national or foreign) to offer the monopolised services on its territory.90 This is logical, provided that the monopoly is justified and proportional under EC law, what the Court in this case accepts.91 Of course, the ECJ hints that also in other –non monopoly – cases there can be a problem of assessing the licence of an operator established in another Member State in the case of online gambling. It is likely that the Member States can also in other situations than a monopoly take the view that the mere licence of another Member State is not sufficient. However, where one would expect that it is difficult for the receiving Member State to assess a foreign licence and this justifies that such a licence is not accepted instead of one from the receiving Member State, the Court refers to the authorities of the Member State of establishment facing difficulties in assessing the qualities and integrity of operators. This is strange and seems to question the seriousness and integrity of a licensing Member State – as if no Member State is capable of maintaining a high level licensing system in the area of online gambling law that assures a sufficient level of protection to citizens other than its own. In any case, the Court clarifies that the only fact of having a licence in one Member State does not suffice to offer its services in the entire Union. It is not clear however if this also implies that an operator licensed in one Member State

88 Santa Casa, para. 69. 89 It should be noted that a monopoly does not necessarily imply that there was no competition in the granting of the single licence. Such a competitive tendering procedure allowing all interested operators – also those of other Member States – to apply for the single licence has a high potential to comply with Community Law. Littler, supra note 39, 214. 90 Cf. Ladbrokes, para. 83. 91 The validity of a monopoly was also in another case, before the EFTA Court, easily accepted. The Court only sees advantages in the coinciding of the role of operator and regulator: ‘Furthermore, it is plausible to assume that in principle the State can more easily control and direct a wholly State-owned operator than private operators. Through its ownership role, the State has additional ways of influencing the behaviour of the operator besides public law regulations and surveillance’ (EFTA Court, case E-1/06, EFTA Surveillance Authority v. Norway, para. 51). It is strange that in neither of the cases the Courts reveal the main risk of a state monopoly, namely the conflict of interest. The State is judge and party at the same time in a matter where it derives revenues from. 179

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and applying for a licence in another, as was the case in Gambelli and Placanica, has to satisfy all the requirements of that Member State or that, on the contrary, a Member State has to take into account the requirements already complied with in the Member State of establishment (‘mutual consideration’). The absence of genuine mutual recognition in the area of gambling law is not a true surprise. Mutual recognition means that Member State A must admit goods or services coming from Member State B to its territory, if those goods or services have been lawfully produced and marketed in Member State B, according to the rules applicable in Member State B.92 There is a ‘natural’ limit to this principle. There has to be a certain similarity; mutual recognition implies that there is something to ‘mutually recognise’.93 Member States are only under an obligation to recognise rules and controls done by other Member States that offer comparable guarantees as the own rules and controls.94 Their obligation stops where rules are concerned that where adopted out of a different regulatory philosophy and that are not directly functional equivalent to the own rules.95 The difference in approach however has to be substantial; otherwise there is no reason for a Member State to ‘fear’ the regulation of another Member State. Even more than the danger of a ‘race to the bottom’96 this is actually the direct reason to reject mutual recognition: ‘[…] when issues such as the safety of goods or the protection of consumers of financial services are at stake Member States do not trust the regulatory standards of the other Member State and are simply not ready to give access to their market to potentially unsafe goods. The problem is thus one of direct externalities rather than indirect economic externalities.’97 Gambling can involve such high stakes, like consumer protection and health and is thus a sensitive area where no risks should be taken on the regulatory level. Such sensitive areas are better left to harmonisation than to mutual recognition. It is beyond doubt that the choice for allowing or prohibiting certain forms of gambling and for a limited licence regime or an open one, cannot be sacrificed for mutual recognition. However, it is unlikely that all the regulatory regimes in

92 Kapteyn, P.J.G. and Verloren van Themaat, P., The law of the European Union and the European Communities (Alphen a/d Rijn: Kluwer, 2008), p. 581. 93 Craig, P. and De Burca, G., EU Law, (Oxford: Oxford University Press, 2007), p. 828; Bernard, N., ‘Flexibility in the European Single Market’, in Barnard, C. and Scott, J., The law of the single European market: unpacking the premises, (Oxford: Hart, 2002), p. 105; Hatzopoulos, V., Le principe communautaire d’équivalence et de reconnaissance mutuelle dans la libre prestation de services (Athens/Brussels: Sakkoulas/Bruylant, 1999), p. 152. 94 Case 124/81, Commission v. UK (UHT Milk), [1983] ECR 00203. 95 Case 188/84, Commission v. France (Woodworking Machines), [1986] ECR 00419; Bernard, supra note 93, p. 104. 96 Kapteyn, P.J.G. and Verloren van Themaat, P., supra note 92, pp. 581–582. 97 Bernard, supra note 93, p. 108. 180



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all the Member States differ substantially and that there are no genuine double regulatory burdens that can be avoided. ‘Mutual consideration’ is therefore needed, unlike ‘mutual recognition’. Moreover, in Placanica and Santa Casa, there was a shift in grounds of justification of the restrictive regimes from consumer protection to the fight against fraud and crime. It is fair to assume that as a lot of Member States have this justification in common some equivalent protective rules have been or will be generated. 4.3.2. Justification of the Belgian Restrictions Given the guidelines that the ECJ has provided, are the amendments of the Belgian Gambling Act compatible with the primary EU law? In this part we consider the imperative reasons of general interest that justify the restrictions on the free movement of services according to the Belgian Government. In the next section the proportionality of these rules will be discussed. The restrictive licensing system of the Belgian Gambling Act is inspired by two principle grounds for justification. On the one hand there is the protection of vulnerable persons against gambling addiction. On the other hand we see the fight against fraud and criminality. Both reasons contribute to the larger objective of ‘consumer protection’. Although the ECJ also uses this term, it seems to cover different objectives sometimes98 and is therefore not sufficiently specific – in the gambling case law99 ‘the consumer’ just seems to be a synonym of ‘the player’. When legislation aims at consumer protection in the sense of preventing gambling addiction, the consumer at stake is not every player, but only a specific group of vulnerable persons – children and people with a tendency for addiction. While when the objective is consumer protection in the sense of e.g. assuring the game to be fair and crime free, every player is concerned. In that case the consumer notion is the same as the one used in European consumer contract law, namely that of a natural person who is acting with a trader for purposes which can be regarded as outside his trade or profession.100 To avoid confusion, it is therefore better to make a clear distinction between both imperative reasons, as does the Belgian Government. This of course does not stand in the way to the fact that the same law can pursue several objectives, as does the Belgian Gambling Act. Certain provisions can aim at the protection of vulnerable persons, others at the prevention of fraud and criminality. 98 The notion of consumer is approached very differently within EU law and has different meanings depending on the objective of the Regulation or Directive. Nebbia, P. and Askham, T., EU Consumer Law (Richmond: Richmond Law & Tax, 2004), pp. 36–38. 99 E.g. Gambelli, paras. 63, 67 and 69; Placanica, paras. 46, 47 and 54. 100 E.g. art. 2(2) Directive 97/7 on the protection of consumers in respect of distance contracts. 181

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The Belgian Gambling Act tries to realise both objectives by a channelling policy. This was from the start the underlying idea of the Gambling Law and remains to be so with the recent amendment.101 The aim of such a policy is to create a legal offer of gambling that is strictly controlled and that attracts players from the illegal circuit. The ECJ refers to the channelling of gaming and betting into controlled systems only in the context of crime prevention.102 The Belgian Government is however correct to see a channelling policy also as a way to protect certain vulnerable individuals.103 Indeed, playing illegal games offers no protection whatsoever on age control or on the information and exclusion of players clearly exceeding their playing limits. In a controlled licence system the operators have strict legal obligations on age verification and the access control of excluded players. The ECJ seemed to focus on the prevention of fraud and criminality because in the case at stake, Placanica, there was doubt on the reality of the objective of the protection of vulnerable persons, as will be explained in the next paragraph. When a Member State claims that the protection of vulnerable people by reducing the gambling opportunities is an objective of the national gambling legislation, it has to demonstrate that this objective is real. This is what the ECJ means when it states that ‘[the] restrictions must in any event reflect a concern to bring about a genuine diminution of gambling opportunities and to limit activities in that sector in a consistent and systematic manner’.104 For the Italian betting legislation at stake in Gambelli and Placanica that requirement was not met, as the Italian legislature was pursuing a policy of expanding activity in the betting and gaming sector, with the aim of increasing tax revenue.105 One cannot reduce gambling activities and expand them at the same time. The amended Belgian Gambling Act however does not suffer from a similar contradiction. From the start in 1999 there was opted for a strictly limited number of gambling venues with little publicity and a rather restricted range of games that can be offered. Every comparison with the Italian expansion falls short. The fact that the Belgian National Lottery maintains a more expansive policy with extensive publicity campaigns and a growing range of products, does not affect the reality of the objective of the Gambling Act. As advocate-general Bot pointed out, different gambling sectors can be regulated differently.106 The amendments of the Gambling Act do not contain an expansion of the gambling opportunities 101 Bill 2009, pp. 4 and 5. 102 Placanica, para. 52. 103 Cf. Ladbrokes, para. 54. 104 Zenatti, paras. 35 and 36; Gambelli, paras. 62 and 67; Placanica, para. 53. 105 Placanica, para. 54. 106 Opinion of Advocate General Bot, Santa Casa, points 305 and 306. Cf. EFTA Surveillance Authority v. Norway, para. 45; Ladbrokes, paras. 56 and 57. 182



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that is contrary to the aim of protecting vulnerable persons. On the contrary, the Belgian Gambling Act will even limit the number of online operators, a decision not seen in surrounding countries like the UK and France. The only weak point here is that the number of betting licences is not laid down in the law but will be fixed in a Royal Order. Care should be taken that the ultimate number of betting licences does not imply an expansion of betting services within the Belgian territory that cannot be reconciled with the interest of protecting the vulnerable players. The ECJ has rightly observed that a specific number of licences should be motivated and cannot just be accepted because it is ‘sufficient’ for the whole of the national territory.107 Another objective of the amended licence system of the Belgian Gambling Act is to prevent fraud and criminality. In Santa Casa it became clear that more and more Member States will rely on this objective because it more easily passes the proportionality test than the objective of protection of vulnerable players. 108 The Portuguese Government leaves the latter completely aside in its defence before the Court.109 The ECJ confirms itself that ‘games of chance involve a high risk of crime or fraud, given the scale of the earnings and the potential winnings on offer to gamblers.’110 The reality of this overriding reason is more easily accepted than that of the other objective. There does not seem to be any obstacle to the recognition of this ground of justification for the amendments of the Belgian Gambling Act. The grounds of justification put forward by the Belgian Government seem to be real and genuinely directed at a restricted, safe – both for addiction and fraud – offer of gambling. The first part of the Gebhard test is thus passed: there are imperative requirements in the general interest that justify a restriction of the Treaty freedoms. However, the test does not stop there and the sting is in its tail: the proportionality of the restrictive measures. The Member States are free to set the objectives of their gambling policy and to define in detail the level of protection sought. However, the restrictive measures that they impose must satisfy the conditions laid down in the case law of the Court as regards their proportionality.111 As the ECJ gave more guidelines on proportionality in gambling legislation in the last three cases, a review of the Belgian amendments in the light of this principle is necessary. Two problems deserve special attention in that analysis: for online operators the obligation to be established on the Belgian

107 Placanica, para. 51. 108 As we predicted the Member States would do: Hoekx, supra note 68, p. 92. 109 Santa Casa, para. 62. 110 Santa Casa, para. 63. Already mentioned in Schindler, para. 60. 111 Placanica, para. 48; Santa Casa, para. 59. 183

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territory and for all operators applying for a Belgian licence the value attached to licences granted in other Member States. 4.3.3. Proportionality of the Belgian Restrictions 4.3.3.1. Mandatory Establishment of Online Operators on Belgian Territory To control online operators effectively the amended Gambling Act demands that the server containing the gambling transaction and other valuable data is located on Belgian territory. This requirement seems to be perfectly suitable for the aim of fraud and crime prevention. It allows a quick and successful control by the Belgian authorities. Also the necessity of the obligation is not subject to discussion. A less restrictive measure achieving the same goal of effective control is not really conceivable. As said, a control at distance, via telecommunication networks does not guarantee the same degree of correctness and reliability. Moreover, investing in a server in another Member State is not an insurmountable obligation for an operator. There is however a second obligation for online operators that constitutes a far greater burden than the presence of a server in the Member State of provision of the service. The amended Gambling Act introduces a system of supplementary licences for gambling through means of information society instruments. This implies that only operators with an A, B or F1 licence and thus in the possession of a physical casino, gaming machine hall or betting shop in Belgium can obtain a licence for the provision of online gambling to Belgian consumers. In short, an online operator is forced to establish himself in Belgium, what implies a high financial cost, not only for the installation of a venue, but also for the securities that have to be paid to obtain a licence and the annual contribution all operators have to pay. This measure can be suited to control the operators,112 but it is not sure that it is proportionate sensu stricto.113 The requirement of a permanent establishment is the very negation of the freedom to provide services; such a requirement is only acceptable if it constitutes a condition which is indispensable for attaining the objective pursued.114 It is true that control by another Member State may be an ineffective way of ensuring compliance with Belgian regulatory requirements when the supplier of services is established in that other Member State, as could be the case with online gambling.115 However, is not a less restric-

112 Bill 2009, p. 10. 113 Littler, supra note 56, p. 37. 114 Case 205/84, Commission v. Germany, [1986] ECR 3755, para. 52; case C-222/95, Société civile immobilière Parodi v. Banque H. Albert de Bary et Cie, [1997] ECR I-3899, para. 31. 115 Bernard, supra note 93, p. 107. 184



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tive measure conceivable on which to organise an effective Belgian control? This seems to be the case, namely the requirement to have a server on the Belgium territory, as explained above. What does the physical presence of the operator add to the control of the server? The Belgian authorities would obtain an extra means of pressure: if the operator does not comply with the requirements of his supplementary licence, action can also be taken against his licence for a physical venue.116 However, this is unacceptable in case the operator has done nothing wrong with regard to the conditions of his principal licence. If the requirement of establishment is deemed compatible with EU law and every Member State would introduce a similar condition, an online gambling market completely fragmented along national borders would arise. The seeds of such a fragmentation are already present in the Santa Casa judgment, with the – debatable – implied conclusion that a Member State cannot assess the qualities of operators to offer their services elsewhere in the Union. However, even in the light of that case law the establishment condition seems to be disproportionate. A national licence and the presence of a server should suffice. One could moreover question whether the extrapolation of territorial borders to the virtual environment of the internet is a realistic option. Has the internet not expanded to such an international extent by now that a return to wholly national control is impossible? From a technical perspective this is probably feasible, but is the enforcement also affordable? It is of course true that for the moment Member States experience enforcement problems as regards the internet that forces them to rely on measures like the mandatory presence of a server on the national territory, as this is felt to be the only means guaranteeing a fast and reliable control. The system of supplementary licences shows a second impediment that might be incompatible with the freedom of establishment and the freedom to provide services. For the moment all the licences A and B have been distributed and the amendment of the Gambling Act does not provide in a transitory regime with a tender for new licences or a redistribution of existing licences. This implies that online operators from other Member States willing to provide their casino websites to Belgian players have no possibility to do so in practice. Because of the system of supplementary licences there is a de facto prohibition of all operators not already having a casino or gaming machine hall in Belgium. Only the market of betting and online betting will be open for new operators. As such there is no problem with only allowing a limited number of operators on the market. It is clear from the discussion above that Member States have the right to choose their own regime. It is also clear that Belgium has acceptable and realistic reasons to maintain a system with a limited number of licences. However, in those – acceptable – circumstances the Treaty freedoms also have to 116 Bill 2009, p. 11. 185

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be respected. In the actual system a bona fide online operator ready to establish himself in Belgium and open a casino to be able to also provide online casino gambling has no chance of entering the Belgian market. Is this protection of the existing market structure proportionate? The argument that the existing casino and gaming machine hall operators are suited the most because of their proven reliability makes no sense. There is no proof that the operator of a physical venue is more capable of operating a gambling site than an online operator from another Member State which already has experience in the field. The argument moreover fails because for betting new operators will be allowed on the market. There is an additional problem with this system. Every operator can only obtain one licence for online gambling, regardless the number of physical venues he owns. With not all casino and gaming machine hall licences being owned by different operators, this means that there will be less gambling websites than there will be physical venues in Belgium, even if all operators would apply for a licence to provide online gambling. It is difficult to understand how e.g. the existence of five casino websites is sufficient when at the same time nine physical casinos exist, a number that in 1999 was decided to be meeting the needs of the Belgian population. In this example there would be room for four more online operators, Belgian or from another Member State, but they are unable to obtain a licence. The system of the supplementary licences is the part of the amended Gambling Act likely to cause the most difficulties under Community law. 4.3.3.2. Licences of Other Member States The last aspect to be discussed under Community law is the problem of licences of other Member States. It is quite clear that pure mutual recognition is not accepted in the field of gambling law, but does this mean that the Belgian law and authorities do not have to take into account licences and controls from other Member States at all? The problem here is not comparable to the one in Santa Casa, but rather to the one in Gambelli and Placanica. For not a monopoly is at stake, but a system with more than one licence. As said, the ECJ pointed out in Gambelli that: ‘The national court will also need to determine whether the imposition of restrictions, accompanied by criminal penalties of up to a year’s imprisonment, on intermediaries who facilitate the provision of services by a bookmaker in a Member State other than that in which those services are offered by making an internet connection to that bookmaker available to bettors at their premises is a restriction that goes beyond what is necessary to combat fraud, especially where the supplier of the service is subject in his Member State of establishment to a regulation

186



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entailing controls and penalties [and] where the intermediaries are lawfully constituted […].’117 Especially with regard to licence conditions the ECJ objects to the double regulatory burden imposed on service providers. There is nothing wrong with the introduction of a licence as a means to control a certain sector, but ‘[s]uch a measure would be excessive in relation to the aim pursued, however if the requirement to which the issue of a licence is subject coincided with the proofs and guarantees required in the state of establishment.’118 The Member State of provision of the service must therefore take into account the evidence and guarantees already furnished in the Member State of establishment. This is much lighter than mutual recognition or the application of the country of origin principle. It does not imply that the Belgian authorities automatically have to award a licence (of the new licences made available) to every (betting or media game) operator established and licensed in another Member State. This is more so given the recent Santa Casa decision, that this foreign operator should not apply for a Belgian licence – there is no obligation of mutual recognition.119 What it does imply, is that when assessing the application of an operator established and licensed in another Member State, the Gaming Commission should take into account the requirements already fulfilled in the Member State of origin and the controls already executed over there. Not all gambling legislation from other Member States is lax or worthless – certain Member States provide without any doubt guarantees comparable to the Belgian provisions. The willingness of the Belgian authorities to take these equivalent controls and safeguards into account is not clear from the proposed and amended texts although it might exist. This case law of the Court is an extra argument against the system of supplementary licences that requires establishment on the Belgian territory before one can apply for a licence to operate online gambling. Such a system does not take into account the fact that the operator already meets certain, albeit not all, requirements in his Member State of establishment. The Court already pointed out earlier that the requirement to have both a permanent establishment in the Member State of provision and a licence issued by that Member State is not self-evident and conditions in the legislation of the original Member State of establishment should be taken into account.120 Of course this taking into

117 Gambelli, para. 73. 118 Case 279/80, Criminal proceedings against Alfred John Webb, [1981] ECR 03305, para. 20. Cf. case C-355/98, Commission v. Belgium, [2000] ECR I-01221, paras. 37 and 38. 119 In the Zeturf case in France the Cour de Cassation seemed to go in that direction: Cour de Cassation, Chambre commerciale, 10 July 2007, no. 06-13.986, D. (2007), 2359, note J.-L. Clergerie. The ECJ’s case law however does not support this view. 120 Case 205/84, Commission v. Germany, [1986] ECR 03755, para. 47. 187

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account of foreign licence conditions and controls implies some knowledge of the gambling legislation in other Member States. It can however not be an excuse that it is difficult to obtain this information to oppose to the removal of double regulatory burdens. On the contrary, it would be a good exercise in cooperation between regulators and would offer them a structure within which to become informed about the regulatory regimes in other Member States. Moreover it could facilitate a natural evolution towards a degree of convergence between the respective regulatory regimes. It should also be pointed out that the mistrust that exists towards every other regime might be exaggerated.

5. Conclusions After almost ten years the amendment of the Belgian Gambling Act was overdue. Some very important technological evolutions are dealt with in the legal framework now and order is created in the fragmented gambling scene that still existed. One can only welcome the fact that the modification of the law strengthens the coherence of the Belgian gambling policy. Grey areas are clarified and practically all gambling is brought under the control of the same – most obvious and appropriate – body, the Gaming Commission. The modified law shows a clear concern for safe and honest play and for the protection of the vulnerable player. The amendment is without any doubt a giant step forward, but some questions and issues remain. Mainly, the attractiveness of certain elements of the gambling offer, from the perspective of consumer demand is most probably undermined to such an extent that the idea of channelling itself is put at risk. It is questionable whether the Belgian gambling websites with their limited offer and absence of the possibility to pay with a credit card will really attract consumers and thus be a viable substitute for illegal offers. Probably effective prosecution of all Belgian players gambling on websites without a Belgian licence will be necessary to realise a forced channelling into the – according to Belgian law – legal circuit. In that case it should be awaited whether the sanctioning of some players will suffice to sensibilise the entire population or whether a permanent zero tolerance approach will be necessary, in the assumption that the means exist for such an action. From the perspective of European Law, the amendments of the Gambling Act lead to a restriction of the freedom of establishment and the free movement of services. These restrictions will be compatible with Community law if they are justified by an overriding reason in the general interest and proportionate. The first criterion, the grounds for justification, does not pose any problems. Both the objectives of protection of vulnerable persons and the fight against fraud and criminality are realistic motives that fit into the systematic and coherent gambling policy the Belgian authorities pursue with regard to the forms of gambling regulated in the Gambling Act. The fact that the National Lottery, 188



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regulated differently in another act, does not seem to match that policy entirely, does not affect the legality of the objectives of the Gambling Act. What could cause problems under Community law however is the proportionality of the new measures, especially with respect to online gambling. The operators providing online gambling are not only obliged to install a server on the Belgian territory, but also, due to the system of supplementary licences, to establish a physical gambling venue in Belgium. It is questionable whether the last condition passes the proportionality test. Is there not a less burdensome measure conceivable, obtaining the same result of efficient and reliable control? In any case, although pure mutual recognition is out of the question, attention should be paid to the double regulatory burden imposed on operators already licensed in another Member State. There is of course no obligation for the Belgian authorities to automatically grant a licence to an operator established and licensed in another Member State. However, during the application procedure the requirements and controls already met in the other Member State by that operator should be taken into account.

189

Recent Developments in German Gambling Law Tilman Becker

1. Introduction The different Member States of the European Union have gambling regulations in place that regulate the same gambling activities differently. First it has to be defined what a gambling activity is. The definition of a gambling activity within a Member State is based on gambling law and at the same time gambling law is shaped by the definition of gambling activities. The distinction between and unification of different gambling activities as put in force by the respective national regulations differs between countries and takes into account the political, social and cultural traditions of that country. In this contribution a distinction is made between the following gambling activities: – Lotteries;

– Traditional casino games including card games and roulette;



– Gambling machines including slot machines, video lottery terminals and fruit machines;



– Betting, including sports betting; and



– Contests.

In nearly all of the Member States of the European Union gambling is regulated by different laws taking into account the specific history and culture of the gambling activities in each of the Member States. It is already a demanding task to find a categorization of gambling activities taking into account the different laws for different gambling activities within one country. It is an even more demanding task to come up with a categorization of gambling activities taking into account the different kinds and categories of gambling activities as defined by gambling regulations in all of the Member States. While a detailed precise distinction between gambling activities depends on the jurisdiction in question, the above Littler et al. (eds.), In the Shadow of Luxembourg, 191–207 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

distinction between lotteries, traditional casino games, gambling machines, betting and contests represents categories that are simultaneously comprehensive and mutually exclusive whilst being suited to the European perspective. In the Member States of the European Union the gambling market and the different gambling activities have differing economic importance. The gross sales or turnover in the German market for gambling account for roughly €32 billion. This is equal to the amount of money spent by all private and public universities in Germany. Gambling machines have a market share of 45% and lotteries have a market share of 31%. Traditional casino games are the next largest segment, representing 18% of the market. The market share represented by sports betting is roughly 5%, and contests account for under 0.5% of the market. The net sales or gross gaming revenue account to roughly €8 billion. Regarding gross gaming revenue, lotteries have the highest market share with 58% followed by gambling machines with 32%. Traditional casino games have a very high payout ratio and accordingly the net sales are rather low. The market share for casino games in net sales is 4% which is also the market share for sports betting. Contests have a market share of roughly 2%.1 This contribution will take the following format. Firstly, an overview of the different categories of gambling activities will be provided, dealing with lotteries, casino games, gambling machines, sports betting and contests. The second part will analyse the Interstate Treaty on Gambling with the third section covering unresolved problems in the regulatory regime, particularly issues of coherence between federal and state law and secondly challenges posed by internet gambling.

2. Categories of Gambling Activities 2.1. Lotteries The lottery ‘6 aus 49’ is the main and most popular lottery in Germany. Two times a week, on Wednesday and on Saturday, 6 numbers out of 49 are drawn. The drawing is shown live on the television. This lottery allows purchasers to select the numbers on the lottery ticket. It will be called a ‘choice number lottery’ to distinguish it from the kind of lotteries, where the lucky numbers are preselected as given on the lottery ticket. These lotteries will be called ‘pre-selected number lotteries’. The final payout is not determined until sales for a particular draw are closed and thus all the stakes are placed. All the players with three winning numbers

1 Compare in detail Becker, T., The German Market for Gambling and Betting, in: Spapens, T., Littler, A. & Fijnaut, C. (eds.), Crime, Addiction and the Regulation of Gambling (Leiden/ Boston: Nijhoff Publishers, 2008), 141–164. 192



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will share a certain amount. The same holds for all players with four, five or six winning numbers. Those players who have selected the six numbers drawn and in addition have the winning digit already pre-selected on the ticket get the highest payoff and share the jackpot. Roughly 50% of all stakes are paid out to the winners; this is the average payout ratio for the lottery ‘6 aus 49’. The lottery ticket for the lottery ‘6 aus 49’ also offers the player opportunity to play three other lotteries, two of which are ‘Super 6’ and ‘Spiel 77’. These lotteries are examples of a pre-selected number lottery, because the numbers are already printed on the lottery ticket. The draws take place two times a week. A fourth draw is offered on the basis of the ticket, namely the ‘Glücksspirale’, a social lottery, which is drawn once a week. All these four lotteries are conducted by the ‘Deutscher Lotto- und Totoblock’, the German Association of the State Lotteries and offered in each of the 16 German states by the respective state lottery. The lottery tickets can be purchased in one of 25 000 shops with a lottery sales point (‘lottery shops’). Generally in these shops newspapers, tobacco products and other goods like sweets or office supplies are also offered. In rural areas these lottery shops are often the only local supply of every day needs. The North German Lottery, (hereinafter referred to as the NKL), and the South German Lottery, (hereinafter referred to as the SKL), are what is known as ‘class lotteries’. Each class lasts one calendar month and each lottery series runs for six classes, i.e. six months. So every year there are two series of the NKL, from April through September and October to March and two series of the SKL from January to June and from July to December. The numbers are pre-selected. All the prizes in the lottery are fixed in advance and increase from class to class. The idea of the game is to start playing in the first class, the first month and enjoy the increased odds of winning from class to class. Although there is no obligation to play for the whole six-month series, there are incentives to do so. Class lotteries are offered in some of the lottery shops, through the mail by private lottery collectors (Lotterieeinnehmer) and can be entered via the internet. Scratch card lotteries are offered by the German Association of State Lotteries and can be purchased in the lottery shops. Beside the ‘Glücksspirale’, offered by the German Association of State Lotteries, two other social lotteries are offered, one by the ‘Aktion Mensch’ and the other by the ‘ARD Fernsehlotterie: Ein Platz an der Sonne’. These two social lotteries, the so called television lotteries (Fernsehlotterien) are offered in collaboration with the public television channels (ARD and ZDF). Tickets for these two social lotteries can be purchased at post offices, banks and via the mail through the services of aforementioned private lottery collectors and the internet. Although ‘bingo’, the environmental lottery, is the third television lottery which is available in Germany, it is not popular.

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The German Association of State Lotteries offers another lottery called ‘Keno’. ‘Keno’ gives players the possibility to select from two to ten numbers out of seventy numbers. The payout differs according to the amount of the stake and the statistical winning probabilities. For ‘Keno’ the draw of the lucky numbers takes place every day. Together with ‘Keno’ another lottery called ‘Plus5’ can be played. While ‘Keno’ is a choice number lottery, ‘Plus 5’ is a pre-selected number lottery. The average payout ratio is roughly 50%. The lottery ‘6 aus 49’ has a market share in the lottery market of 55%. The class lotteries have a market share of 12%, and the social lotteries including ‘Glücksspirale’ have a market share of 10%. Table 1: Gross sales of German lotteries in 2007 (in million Euro) 2 German Association of State Lotteries ‘6 aus 49’

4974.6

‘Spiel 77’

991.0

‘Super 6’

705.1

‘Glücksspirale’

189.7

Scratch card lotteries

220.9

‘Keno’

225.1

‘Plus 5’

24.0

Total

7389

Class Lotteries ‘NKL’

435.7

‘SKL’

636.6

Total

1072.3

Television Lotteries ‘ARD Fernsehlotterie’

165.6

‘ZDF Aktion Mensch’

435.3

‘Bingo’

58.6

Total

9.9

2 Source: https://gluecksspiel.uni-hohenheim.de/fileadmin/einrichtungen/gluecksspiel/ Markt/Gluecksspielmarkt07.pdf. 194



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2.2. Traditional Casinos Games (Card Games and Roulette) The casinos in Germany are in some of the states run by the government or at least owned by the state government and in other states run or owned by private companies, as licensed by the state governments. There are 84 casinos in Germany including those casinos which depend solely upon gambling machines. Internet casino games are illegal in Germany. Each state regulates its casinos by its State Law on Casinos (Spielbankgesetze der Bundesländer). The casinos offer card games, mainly baccarat, blackjack and poker, both as a cash game and on the basis of tournaments. Furthermore roulette is available at casinos. But less than 30% of the gross sales of casinos are generated by the traditional casino games. More than 70% are generated by gambling machines. The gross sales of the games offered in casinos accrue to €10.26 billion and are roughly as high as the gross lottery sales of €9.07 billion. The gross sales of the illegal casino games available on the internet are not known. 2.3. Gambling Machines Gambling machines (slot machines, fruit machines or video lottery terminals) are available not only in casinos but also in amusement arcades and bars or restaurants. While there are roughly 9000 gambling machines in casinos, about 220 000 gambling machines are available in 8 000 amusement arcades and in 60 000–70 000 bars or restaurants. German law distinguishes between the gambling machines in casinos (Glücksspielautomaten), with higher stakes and a higher payout ratio, and the gambling machines (Geldspielgeräte) in amusement arcades and bars or restaurants. Gambling machines in amusement arcades and restaurants are regulated by federal law by means of the § 33 Commerce Regulation Act (Gewerbeordnung) and the technical specifications are regulated by the Gaming Regulation (Spielverordnung). Gambling machines in casinos are regulated by the Federal State Laws on Casinos and the Federal State Implementation Laws (Ausführungsgesetze der Bundesländer) coordinated by the Interstate Treaty on Gambling. The gambling machines in amusement arcades and bars or restaurants generate gross sales of €7.75 billion. The gambling machines at amusement arcades, restaurants and bars historically had low stakes and low gains. But in the last decades, these gambling machines were becoming more and more like the gambling machines in casinos. Nowadays there is hardly any difference between the gambling machines in casinos, as regulated by the respective state, and the gambling machines in amusement arcades, restaurants and bars, as regulated by the federal state. In Germany as a federal state a division of tasks between the federal government and the state governments is in place. The state governments are responsible for education and police and accordingly the states are responsible for police law

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issues, while the federal government is responsible for commerce law issues and all other issues. German law regards gambling machines in amusement arcades, restaurants and bars as a commerce law issue, while gambling machines in casinos are regarded as a police law issue. This missing coherence in the German regulations of the gambling machines is a very sensitive political issue between the federal government and the state governments. With the recent reform of the division of tasks between the federal state government and the state governments the states have gained the right to regulate gambling arcades. The consequences of the reform are not clearly established yet, but among law experts the opinion that the federal states now have the right to regulate gambling machines in amusement arcades, bars and restaurants, is gaining support. 2.4. Sports Betting While in other countries, like the United Kingdom, betting on the outcome of different issues is rather popular, in Germany betting activities are focused mainly on sport results. Within the category of sports betting we have to distinguish between horserace betting and other sports betting, which in practice mainly relates to betting on football matches. Due to the new Interstate Treaty on Gambling only the states may offer sports betting other than horse betting. While sports betting is regulated by the Interstate Treaty on Gambling and the Implementation Law of the respective state, horserace betting is regulated by the Racing Betting and Lottery Act (Rennwett- und Lotterie­gesetz). The German Association of State Lotteries offers two kinds of sports betting, called Toto and Oddset. The Toto offers two kinds of football betting. One option is for the outcome of thirteen games to be selected by the vendor, in terms of the home team winning, the home team loosing or drawing with their opponents. The second option is for the player to predict which of the six matches selected by the vendor, out of a total of forty-five, will result in a draw or next to a draw. The odds are calculated according to the pari-mutuel betting principle. Pari-mutuel betting differs from fixed-odds betting. The final payout is not determined until the pool is closed. In fixed-odds betting, the payout is agreed at the time the bet is agreed upon between the parties. Oddset offers a fixed-odds betting. Two kinds of the game are offered. Either the result (winning, losing or a draw) of at least three and at most ten matches have to be predicted, or the result (number of goals of each team) of one game has to be predicted. The participation is possible in all shops where there are sales points of the German Association of State Lotteries. The gross sales or turnover for Toto is with much less than €0.1 billion very small. The turnover of Oddset has been decreasing for the last years from more than 0.6 billion Euro to less than €0.25 196



Recent Developments in German Gambling Law

billion. Furthermore sports betting is offered in about 6 000 illegal betting shops (estimated turnover €0.5 to €1 billion) and on the internet (estimated turnover of €1 to €1.5 billion). Due to the Interstate Treaty on Gambling any internet betting is illegal. Horserace betting is offered by private bookmakers. Here again we have a lack of coherence in German gambling law. While horserace betting is regarded as a commercial law issue and regulated by the federal state, other sports betting is regarded as a police law issue and regulated by each of the states and coordinated by the Interstate Treaty on Gambling. The estimated market share of sports betting offered by the only legal vendor, the states, is estimated at 10% of the soccer betting market. This means that a share of 90% of the market is illegal. .

2.5. Contests Contest games are offered by private television channels, which require participants to enter via a €0,50 telephone call and by companies which generally do not require a stake of monetary value. Not only the gambling machines in amusement arcades, bars and restaurants are regulated by commerce law (§ 33 c Gewerbeordnung), but also other games with the opportunity to win (§ 33 d Gewerbeordnung). These are not regarded as games of chance. Games of chance are regulated by the Interstate Treaty on Gambling. The distinction made by law between games of chance or gambling and other games is a critical one. In Germany gambling is defined as taking part in a game, where a substantial amount of money or other assets is at stake and the result is due to chance or at least has some elements of chance.3 If the result depends on skill, this is not regarded as a game of chance or gambling. This distinction between gambling, which is a police law issue and may be offered only by the states, and other gaming, which is a commerce law issue and not covered by the Interstate Treaty on Gambling, is decisive for getting a permit to offer gaming. Accordingly the definition of gambling has been challenged with respect to the amount at stake and the element of chance. It is often hard to distinguish between a game of chance and a game of skill. Furthermore this distinction differs depending on the participants taking part in the game. A game between an experienced poker player knowing the a priori probabilities to win and updating their beliefs correctly and a layperson may be regarded a game of skill. A poker game between experienced players may be regarded a game of chance. Furthermore the meaning of what a ‘substantial 3 There is no official definition of gambling in German law, but this definition evolved from the decision of the German Federal Court of Justice (BGH, Beschluss of 29 September 1986 – 4 StR 148/86 -, BGHSt 34, 171; BGH, Urteil of 4 February 1958 – 5 StR 579/57 -, BGHSt 11, 209). 197

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

amount at stake’ is questionable. The amount needed to take part in the game only once may be negligible but with multiple or repeated participation this amount may become substantial. The distinction made by law between games of chance or gambling and other games with the opportunity to win has recently been challenged with regard to these two issues. Those contests, for which participation costs less than or the equivalent of a postal stamp on a letter, are traditionally not regarded as gambling and are not part of the Interstate Treaty of Gambling. It is of course a critical issue to differentiate between gambling with low stakes and other games with the opportunity to win. Recently the so-called contest games (Gewinnspiele) have received a lot of attention. The contest games of the private television channels have generated a lot of revenue for these channels. In those contests the answers to the questions are very obvious. Winning the game depends to a large extent on whether the participant gets the chance to submit the answer by phone, because few of the calls get through. Accordingly it could readily be expected that these games should be regarded as a form of gambling and consequently that the offers made by the television channels might be regarded as regulated by the Interstate Treaty on Gambling. However this is not the case. These games are regulated by the Interstate Treaty on Media (Rundfunkstaatsvertrag). In the Interstate Treaty on Media those games with the opportunity to win money (Gewinnspiele) where the cost to take part is not higher than €0,50, are explicitly allowed (§ 8a Rundfunkstaatsvertrag). Recently, these games have been exclusively regulated by the State Media Authorities to prevent participation by minors and consumers from being mislead. Furthermore the new regulation on these games by the State Media Authorities (Gewinnspielsatzung) bans any efforts to induce multiple or recurrent participation in the game. To further illustrate the lack of coherency surrounding the approach to the contests several cases arose where private persons had established a tombola with prizes to sell raffle tickets on the internet. The cost of a ticket was €0,50 as for the call-in games aired by the television channels. Courts had to decide whether this has to be regarded as (illegal) internet gambling or as a (legal) game comparable to the call-in games on television.4 Not based on sound reasons but on the desired outcome, the current case-law holds that recurrent participation in the call-in television game format has to be judged differently than recurrent participation in a tombola. The reasoning behind this is incomprehensible. It can be expected that in other cases the present demarcation between gambling as regulated by the Interstate Treaty of Gambling and contests will be challenged further.

4 VG Düsseldorf (Beschl. of 16 July 2009 – Az.: 27 L 415/09), LG Köln (Urt. of 7 April 2009 – Az.: 33 O 45/09) 198



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The demarcation between games of chance and games of skill is questionable. Recently some owners tried to sell their homes by means of sweepstakes, contests or raffles. The present practice of the gambling regulation authorities regards the selling of lottery tickets with the house as the first prize as illegal gambling. This has induced other home owners to design their offering as a game of skill. So far, this seems to be regarded as a commerce issue and therefore as a legal game.

3. The Interstate Treaty on Gambling The Interstate Treaty on Gambling is the result of the decision of the Federal Constitutional Court on sports betting on March 28, 2006, the general facts of which shall now be described.5 With an authorisation under the Racing Betting and Lottery Act (Rennwettund Lotterie­gesetz), the complainant ran a betting office in Munich, in which, as a bookmaker, she commercially took and arranged bets on horse races. In July 1997 she attempted to register an extension of her business in arranging sports bets with the authorities of the state capital of Bavaria, Munich. The city authorities, in consultation with the Bavarian State Ministry of the Interior, refused to grant the necessary authorisation, referring to the comprehensive prohibition against public games of chance, which carried sanctions, contained in § 284 of the Criminal Code (Strafgesetzbuch). The complainant took legal action against the city authorities before the Administrative Court (Verwaltungsgericht), with the goal of obtaining a declaratory judgment that organising fixed-odds sport bets, excluding horse-racing bets, did not require permission. During the proceedings, she made an application for the grant of permission, which was rejected by the defendant, and she then added to her statement of claim an application in the alternative that the defendant be judicially obliged to grant permission to organise or arrange sports bets. In German law horserace betting is regarded as a commercial law issue and any (reliable etc.) person applying for a licence has a right to get a licence. Other sport betting is regarded as a police law issue and only the states are allowed to offer sports betting opportunities. Sports betting (except horserace betting) is forbidden under the criminal law. The decision of the Federal Constitutional Court in this case was the following: It is incompatible with the freedom to choose an occupation, as formulated in Article 12.1of the Basic Law (Grundgesetz) that under the Act on the Lotteries and Betting Organised by the Free State of Bavaria6 sports betting in Bavaria

5 BVerfG, 1 BvR 1054/01 of 28 March 2006. 6 Gesetz über die vom Freistaat Bayern veranstalteten Lotterien und Wetten, Staatslotteriegesetz – State Lottery Act of 29 April 1999. 199

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may be organised only by the Free State of Bavaria, because the state monopoly is not consistently geared to the goal of combating the dangers of addiction. The legislature is ordered to pass new provisions for the organisation and arranging of sports betting, taking into account the constitutional requirements by 31 December 2007. The legislature is constitutionally obliged to amend the legislation in the area of sports betting, exercising its framing discretion under legal policy. If the legislature wishes to retain a state betting monopoly, it must orient this strictly to the goal of combating betting addiction and restricting the passion for betting. The implications of the decision of the Federal Constitutional Court on sports betting are the following: A state monopoly on sports betting is compatible with the fundamental right of occupational freedom only if it is consistently geared to the goal of combating the dangers of addiction. Not only Bavaria but all other Federal States had similar regulations. Therefore the verdict was valid for all the Federal States Lottery and Betting regulations. The states decided to retain state monopolies for sports betting. The result of this decision was the German Interstate Treaty on Gambling. This treaty is an effort towards a comprehensive and unified framework for lotteries, casino games and sports betting. It is consistently geared towards the goal of combating the dangers of addiction. But a coherent and consistent regulation of the gambling market is still not reached. Horserace betting and gambling machines in amusement arcades, bars and restaurants as well as games of skill (contests, such as television call-in quizzes) and fun games are not covered by the new regulation, whilst casino games including gambling machines in casinos are covered. Horserace betting and gambling machines in amusement arcades, bars and restaurants are still regulated by the federal state and regarded as part of the commercial law. Sports betting, lotteries and casinos are regulated by each of the 16 states and regarded as part of the police law of the states. The lack of coherence is not at least a result of the division of tasks between the federal government and the state governments. Federal and state regulation authorities are in conflict. Tensions are not only noticeable between federal and state regulations but also between the federal states themselves. Against the single vote of the prime minister of Schleswig-Holstein, that is 15:1, it was decided to have the treaty signed by the prime ministers of the states in a circulation procedure at the beginning of year 2008, so as to subsequently notify it to the European Commission. Finally all states signed the German Interstate Treaty including Schleswig-Holstein. The German Interstate Treaty is in force since 1 January 2008. The provisions of the German Interstate Treaty are the following: – Introducing a distinction between ‘particularly dangerous’ and ‘less dangerous’ lotteries according to the event frequency (more or less then two draws a week);

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– Player identification and verification prescribed for ‘particularly dangerous’ lotteries, like Keno;



– Education of the staff involved in lottery ticket sales;



– Mandatory gambling risk information labelling about lottery tickets;



– Stimulating, encouraging, and soliciting advertising is prohibited, indeed advertising may inform only to the extent needed for participation;



– Prohibition of any online gambling and betting and the blocking of the internet homepages of and the money transfers to the (illegal) companies offering online betting and gambling by the financial and internet service providers;



– Prohibition of television sponsoring and advertising with exceptions for the traditionally broadcasted draw of the lottery numbers and for social lotteries;



– Extending the register to ban players already available for casino games to casino slot machines and ‘particularly dangerous’ lotteries like Keno;



– Informing the public about the risk of gambling and about gambling help hotlines;



– Introducing an advisory committee (Fachbeirat) and a gambling supervisory body (Glücksspielaufsichtsbehörde) coordinating the state supervisory bodies; and



– Strengthening the state supervisory bodies.

The provisions of the Interstate Treaty on Gambling are an effort towards a comprehensive and unified framework for lotteries, casino games and betting, consistently geared to the goal of combating the dangers of addiction. Horserace betting and gambling machines as well as games of skill (contests) and fun games are not covered by the new regulation, but casino games including slot machines are. The Advisory Committee (Fachbeirat) is created by §10 German Interstate Treaty (Glücksspielstaatsvertrag) and has the task to independently advise states on the prohibition or allowance of new games and on the regulation of gambling. The Advisory Committee consists of experts who mainly represent the associations responsible for assisting gambling addicts and accordingly has a particular perspective. This Interstate Treaty on Gambling is an attempt to support a comprehensive and coherent approach to gambling regulation. As such this effort has to be highly welcomed. But several problems remain unsolved; other problems have been raised or even caused by the Interstate State Treaty on Gambling. The clearest shortcoming of the provisions of the Interstate Treaty on Gambling is 201

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the lack of any differentiation between the different forms of gambling. There is no clear theoretical concept behind the present legal regulations. History and culture have shaped the regulations. With the goal of combating the dangers of addiction clear guidelines have emerged. The provisions so far have not taken into account the results of research on addiction.

4. Unresolved Problems The Interstate Treaty on Gambling is regarded as consistently geared to achieving the goal of combating the dangers of addiction and as such is regarded as being in accordance with constitutional law. The German Federal Constitutional Court stated in October 2008 that the German Interstate Treaty on Gambling is not incompatible with the German Basic Law (Grundgesetz). But several problems remain unsolved. The two most important ones are: the lack of coherence between federal and state law and the prohibition of internet gambling which cannot be enforced. 4.1. Coherence between Federal and State Law The lack of coherence between federal and state law may at first sight be regarded only as a problem for a unified and consistent regulation of the gambling market. But this missing coherence is much more. It undermines the integrity of the regulation of the gambling market by regarding the form of gambling with the most addicted people as a harmless commercial issue and other forms of gambling with hardly any addicted persons as a major threat to the public due to the danger of addiction and accordingly is regulated by police law. Each year about 5 000 persons receive therapy with pathological gambling as the main problem. The recent prevalence studies come up with estimates of 87 000 to 297 000 pathological gamblers in the German population.7 For comparison there are estimated 1 300 000 to 1 700 000 alcohol addicts and estimated 3 500 000 to 5 000 000 nicotine addicts in the German population. 8 Pathological gamblers are often addicted only to one game or one category of gambling.9 For a pathological card player, poker or black jack may be a problem, but sports betting is not. For a pathological sports better, sports betting may be very attractive, but not slot machines. Of course there are pathological players addicted to more than one category of gambling and the severity of addiction 7 Becker, T., Glücksspielsucht in Deutschland – Prävalenz bei verschiedenen Glücksspielformen, (Frankfurt: Peter Lang, 2009). 8 Becker, T., Werbung für Produkte mit einem Suchtgefährdungspotential, (Frankfurt: Peter Lang, in print). 9 Becker, supra note 7. 202



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correlates with the numbers of games played, but there is mostly a favourite game. If pathological players are asked, what games are problematic for them, most of them name only one or two games out of the same category. The most problematic form of gambling is the use of gambling machines in amusement arcades, bars and restaurants which accounts for 69% of the pathological players in therapy. Gambling machines in casinos come second place, contributing 11% of those players in receipt of therapy. Though the gambling machines in casinos have at least the same potential to become addicted to, these machines are less accessible than those found elsewhere. Amusement arcades can be found in large cities on each corner and even in the vast majority of small towns and villages, whereas casinos are not as widespread. Given the greater availability of gambling machines in amusement arcades compared to gambling machines in casinos, many more people are addicted to these machines. The widespread availability of gambling machines at amusement arcades and in bars and restaurants is the result of an incomplete regulatory regime for amusement arcades. Amusement arcades may not be opened in pure residential areas. But in any mixed area with commerce and private residence or in any solely commercial area, these arcades may be opened like any other form of commerce. The low availability of gambling machines at casinos is the result of the intensive regulation of casinos. Gambling machines in casinos and in amusement arcades differ to some extent. The gambling machines in casinos are characterized by higher stakes, higher winnings and higher payout ratios. The stakes, winnings and the payout ratios of the gambling machines in bars, restaurants and amusement arcades are regulated by the federal Gambling Regulation (Spielverordnung). In former times these gambling machines were a kind of amusement machine with the possibility to win money. Over the last decades, but particularly since the introduction of the new Gambling Regulation of 2005, these gambling machines became similar to the slot machines in casinos, not only concerning the stakes and winnings, but also in the design. Nowadays only experts are able to distinguish between gambling machines in casinos and in amusement arcades. The amusement arcades have evolved to a kind of casino, even in their outer appearance. The figures in Table 2 clearly show that gambling machines located outside of casinos pose the greatest threat in terms of gambling addiction and yet they fall outside the scope of the state monopoly established by the Interstate Treaty on Gambling, which is justified on the basis that it counters gambling addiction. This is the exposed flank of the Interstate Treaty on Gambling regarding EU law. In the Gambelli decision the European Court of Justice stated: ‘First of all, whilst in Schindler, Läärä and Zenatti the Court accepted that restrictions on gaming activities may be justified by imperative requirements in the general interest, such as consumer protection and

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Table 2: Percentage of pathological gamblers and category of gambling according to Becker and Meyer & Hayer 10

Percentage of pathological gamblers according to Becker (2008)

Percentage of pathological gamblers according to Meyer & Hayer (2002–2004)

Gambling machines (amusement arcades and restaurants)

69,0%

63,5%

Gambling machines (casinos)

11,4%

13,5%

Sports betting (shops, internet)

6,8%

1,7%

Roulette

5,8%

6,2%

Poker (card and dice games)

3,6%

1,7%

ODDSET

1,6%

2,8%

Horse betting

0,6%

1,7%

Lottery ‘6 aus 49’

0,5%

0,9%

Scratch cards

0,4%

0,0%

Toto

0,2%

0,0%

Class lotteries (SKL/NKL)

0,1%

0,2%

Sum

100%

100%

Category of gambling

the prevention of both fraud and incitement to squander on gaming, restrictions based on such grounds and on the need to preserve public order must also be suitable for achieving those objectives, inasmuch as they must serve to limit betting activities in a consistent and systematic manner.’11 Having the goal of combating the danger of gambling in mind, the present regulations of the German gambling market are not consistent. Therefore several German courts have submitted preliminary references (Vorabentscheidungs-

10 Sources: Becker, supra note 7 and Meyer, G. & Hayer, T., Das Gefährdungspotential von Lotterien und Sportwetten – Eine Untersuchung von Spielern aus Versorgungseinrichtungen, , 2005. 11 Case C-243/01, Criminal Proceedings against Piergiorio Gambelli and Others¸[2003] ECR I-13031, para. 67. 204



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ersuchen) to the European Court of Justice.12 Not only is there a lack of coherence between the regulation of gambling machines in amusement arcades, bars and restaurants and those in casinos, but also between horserace betting and other forms of sports betting. Sports betting companies claim that the German Interstate Treaty on Gambling is not compatible with EU law because horserace betting is regarded in Germany as a commercial issue, while other sports betting may be offered only by the states and is regarded a police law issue. Not only for the persons and institutions involved in assisting those with gambling addictions, but for anyone interested in rational legislation, the missing coherence regarding gambling machines is gaining attention. The options are manifold and it will be interesting to see, which options will gain political support. At the time being the Gaming Regulation has been evaluated and the results of this evaluation are not yet available. Before the new Gaming Regulation, the amount of stakes, winnings and the payout ratio have been regulated in a rather rigid manner. The new Gaming Regulation introduced some flexibility regulating the inflow and outflow of money but not the amount of stakes and winnings. It is now possible to circumvent the rather strict limits for the amount of stakes and winnings by converting the money into points. Regarding the regulation of gambling machines in bars, restaurants and amusement arcades, the following options are discussed: – Prohibition on converting money into points;

– Mandatory information on the payout ratio;



– Player identification and verification like the one already prescribed for ‘particularly dangerous’ lotteries, like Keno;



– Education of the staff involved;



– Extending the register to ban players already available for casinos games and casino slot machines and ‘particularly dangerous’ lotteries like Keno to gambling machines in bars, restaurants and amusement arcades; and



– Removing gambling machines from bars and restaurants and other places except amusement arcades.

The proposal of the Advisory Committee (Fachbeirat) is very detailed and focusing on the technical design suggesting to restore gambling machines to amusement

12 Relevant preliminary references submitted by German courts are; Case C-409/06, Winner Wetten GmbH v. Mayor of Bergheim (Verwaltungsgericht Köln), Advocate General Bot’s Opinion was delivered 26 January 2010; Case C-316/07, Markus Stoß v. Wetteraukreis (Verwaltungsgericht Giessen); Case C-46/08, Carmen Media Group Ltd v. Land SchleswigHolstein, Schleswig-Holsteinisches Verwaltungsgericht. 205

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machines. The following change in the Gaming Regulation (Spielverordnung) is suggested: – Maximum stake €0,20;

– Minimum time per play 60 seconds;



– Maximum loss per hour €7;



– Maximum gain per hour €30;



– No conversion of money into points;



– No light or sound effects; and



– Mandatory information on the probabilities of winning.

An even further reaching proposal is to include gambling machines into the state monopoly, into the Interstate Treaty on Gambling (Glücksspielstaatsvertrag). However this option is unlikely to prove feasible in reality given the degree of political support for the gambling machine and arcade industries 4.2. Internet Gambling The complete prohibition of internet gambling is not the result of considerations that are based on scientific reasoning but is characterized by helplessness, because politicians viewed a complete ban as the ‘easiest’ way to dismiss the question of how to regulate this sector. The danger to become addicted differs between games, ranging from those forms for which the danger is minimal to those, such as machine gambling, where the risk of addiction is very high. A complete prohibition of internet gambling appears unenforceable. Moreover, formerly legal commercial suppliers offering state lottery tickets on the internet, a game without significant addiction problems, have been forced to emigrate to other jurisdictions and are now offering the same service as a bet. These offers are illegal in Germany.

5. Concluding Remarks The prolongation and extension of the Interstate Treaty on Gambling beyond the end of 2012 in the present form is unlikely. There are too many diverging interests and too many problems unsolved. Schleswig-Holstein decided on October 2009 to resign from the German Interstate Treaty on Gambling favouring a licence system for sports betting. Regarding sports betting, there are two options, to sustain the state monopolies or to introduce a licence system. The discussion on options to regulate sports betting is just starting in Germany. Some countries in Europe, like Belgium, France

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or Italy are experimenting with internet licence systems. Their experience will be decisive for the further development of German gambling law.

207

Changes Large and Small in Dutch Policy on Gambling Cyrille Fijnaut

1. A Small but Complex Market Compared to those in countries like France, Germany, Italy and Spain, the gambling market in the Netherlands is not a very large one. To get an idea of its size, one needs to consult the annual reports of the Gaming Control Board [College van Toezicht op de Kansspelen]. In its annual report for 2008, the Board had the following to say regarding enterprises that hold a national licence to run a gambling operation: – The gross profit from all national lotteries in 2008 was EUR 914 million and that from Holland Casino EUR 700 million, making a total of EUR 1600 million;

– After deduction of costs (EUR 866 million) the net profit was therefore EUR 750 million;



– Of that EUR 750 million, EUR 430 million accrued to the public purse and EUR 320 million to ‘good causes’ such as sport, culture, and development cooperation.1

Nevertheless, this is all-in-all a rather complicated market, certainly from the perspective of people who wish to gamble. At national level, there are the following organisations: – the Dutch State Lottery [De Staatsloterij];

– three ‘Good Causes Lotteries’ [Goede Doelen Loterijen] organised by a single enterprise, Novamedia, which also operates on foreign gambling markets (United Kingdom and Sweden);

1 Gaming Control Board, Jaarverslag 2008, The Hague, 2009, pp. 7–8. Littler et al. (eds.), In the Shadow of Luxembourg, 209–218 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

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– ‘De Lotto’, which also organises the Euroloterij and the Instant Loterij;



– Holland Casino, which currently operates fourteen casinos;



– Scientific Games Racing, an American company that organises betting on horseracing.

In addition there are also – according to the latest figures (2005) – a total of 33,000 gambling machines, for both games of chance and games of skill, in hotels, restaurants, and cafes. There are another 16,000 gambling machines – also for games of chance and games of skill – at about 270 gambling arcades, which also often refer to themselves as ‘casinos’. This therefore gives a total of 49,000 gambling machines.2 This market is to a great extent organised on the basis of the complex Betting and Gaming Act [Wet op de kansspelen], which dates from December 1964. Needless to say, the Act has since been amended on numerous occasions to deal with new developments within the gambling market itself and also in the light of political discussion regarding balanced regulation of this market. After 45 years of piecemeal tinkering, we now have a hopelessly complex piece of legislation that even insiders sometimes find difficult to understand.

2. Towards a New Betting and Gaming Act This situation was one reason why, in August 2009, the Dutch Minister of Justice, Dr. Ernst Hirsch Ballin, published proposals for a new Betting and Gaming Act. In the Explanatory Memorandum accompanying the proposals, it was clearly stated that the primary aim of policy regarding gambling is and will remain the regulation and control of participation in gambling.3 In particular, the proposals repeated that future policy would focus on preventing people becoming addicted to gambling, protecting them, and controlling illegal practices and crime. The Explanatory Memorandum goes on to say that in order to achieve those aims it will be necessary to offer an attractive and reliable alternative. That alternative will be organised on the basis of a system of permits, which will be issued to a limited number of enterprises. Some of them will be issued to state-owned enterprises with a monopoly position (the Dutch State Lottery and Holland Casino). The remaining permits will be for limited periods only and will be issued to enterprises on a case-by-case basis.

2 KPMG, Kengetallen speelautomatenbranch. Onderzoeksrapportage 2003–2005, s.l. 2007, pp. VI–XIII. 3 Ministry of Justice, Regels inzake Kansspelen (Wet op de kansspelen 200*), The Hague, 2 August 2007. 210



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In this way, at least according to the Minister of Justice, there will be systematic and coherent restriction of the supply side of the market; a mechanism to control competition between enterprises, thus restricting their natural tendency to increase the size of the market; and a system that makes it possible to supervise the market in the interest of those who gamble. The proposals also include a number of smaller but not unimportant amendments, for example: – restriction of the number of promotional games, in particular on television;

– limitations on advertising for gambling;



– supervision of gambling organised by permit-holders that are based abroad;



– development of a more transparent system for distributing money to all potential ‘good causes’;



– creation of a new Gaming Authority that will be given a number of important tasks, to be carried out in an effective and professional manner, as regards enforcing the new legislation.

It should also be emphasised that the Minister of Justice refers in the Explanatory Memorandum to the fact that the proposals are entirely in accordance with the (former) Article 45 of the EC Treaty, and in particular are in line with the relevant rulings by the European Court of Justice, from Schindler to Placanica. In other words, the Minister emphatically rejects the criticism by the (then) European Commission – i.e. Mr McCreevy – regarding a number of provisions of the existing Betting and Gaming Act as formulated in the Commission’s letters of April 2006 and March 2007 to the Dutch Government. That criticism – prompted mainly by the battle between De Lotto on the one hand and Ladbrokes and Betfair on the other before the Dutch courts – was to the effect that those provisions constituted unjustifiable restriction of the right to provide services within the Internal Market.4

3. The Current Situation This automatically brings us to the fact that the Minister’s proposals have yet to be incorporated into a Parliamentary bill, let alone submitted in the form of such 4 For a summary of the correspondence between the Commission and the Dutch Government, see the general introductions to the volumes already published in the present series: Coryn, T., Fijnaut, C. and Littler, A. (eds.), Economic Aspects of Gambling Regulation. EU and US Perspectives (Leiden, Martinus Nijhoff, 2008), pp. 1–4, and Spapens, T., Littler, A. and Fijnaut, C. (eds.), Crime, Addiction and the Regulation of Gambling (Leiden, Martinus Nijhoff Publishers, 2008), pp. 3–12. 211

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a bill to the Dutch House of Representatives. In a letter to the House in December 2008, the Minister summed up the reasons why this had not yet been done.5 In the first place, he referred to the ongoing discussion with the European Commission. This is understandable because in February 2008 the Commission again criticised the Netherlands as regards the provisions of the Betting and Gaming Act that relate to betting on sports events. In a letter of September 2008, the Dutch Government gave a firmly worded reply. It repeated, in particular, that as long as there was no harmonisation of national gambling legislation within the European Union, the Dutch Government was under no obligation to open up the market to enterprises that had received a permit in other countries. As the Dutch Government pointed out, in such circumstances the EC Treaty does not impose any obligation regarding mutual recognition of permits.6 Secondly, the Minister referred to requests for a preliminary ruling that the Netherlands had submitted to the European Court of Justice. An initial series of questions was submitted to the Court by the Council of State in the light of a complaint by Betfair to the effect that the existing monopoly on sports betting was allegedly contrary to Article 49 of the EC Treaty, or in any case that the decision not to issue a permit to Betfair was not in line with that article, and also – still according to Betfair – was unacceptable given the principle of mutual recognition. The second series of requests by the Council of State concerned the claim by De Lotto that Ladbrokes should cease advertising for games of chance aimed at people in the Netherlands. In his letter, the Minister does not explicitly say that he intends waiting for the Court’s responses to these requests; one can infer this, however, from his statement that it may well be two years before the European Court of Justice provides its response. Thirdly, the Minister points out that it is not only European developments but a large number of comments on his proposals for a new Betting and Gaming Act that have led to him revising the proposals in a number of respects. He refers, for example to: – organisation of the same ‘level playing field’ for all lotteries as regards the amount they devote to prizes and good causes;

– streamlining of the procedures for processing applications for national games of chance;



– the question of the powers of the new Gaming Authority;

5 House of Representatives, 2008–2009, 24557, no. 93. 6 The letter was only made public in April 2009. See House of Representatives, 2008–2009, 24557, no. 98. 212



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– the question of Internet gambling, specifically in the light of the decision by the Dutch Senate (1 April 2008) that there is no scope for a pilot project to be carried out in this regard by Holland Casino.7

All this naturally raises the question of just what the current state of affairs actually is. Firstly, the Minister of Justice informed the House of Representatives – in a letter dated 23 December 2008 and a second letter in January 2009 – that submission of a complete Parliamentary bill would be postponed for a considerable time, perhaps until late 2010. He did, however, make an exception, saying that he would submit a bill as soon as possible to amend the existing Betting and Gaming Act with a view to setting up a new Gaming Authority. He explained his reasons for this partial amendment by saying that there was an increasing need in actual practice for stricter and more effective supervision of gambling.8 The relevant bill has since been submitted.9 The problem now, however, is that with the fall of the fourth cabinet led by Prime Minister Balkenende at the end of February 2010, further consideration of the bill is now in abeyance. It is therefore highly unlikely that the Parliamentary bill for a new Betting and Gaming Act will in fact be submitted to the Dutch House of Representatives in 2010. Secondly, it should be noted that the Minister set up a committee in September 2009 to advise him on the necessary conditions for regulating Internet gambling, particularly poker. More specifically, the committee is intended to advise on the nature and extent of illegal Internet gambling, the options for setting up a system of legal regulation for this type of gambling, and the consequences of legalising Internet gambling for Dutch policy on gambling in general. The committee was intended to report in March 2010 but has not yet done so.10 Thirdly, it should be emphasised that the Minister informed the House of Representatives in October 2009 that he saw the ruling by the European Court of Justice in the case of Liga Portuguesa de Futebol Profissional (CA/LPFP), Bwin International Ltd, formerly Baw International Ltd v. Departamento de Jogos da Santa Casa da Misericórdia de Lisboa as confirming his view that there is no question of mutual recognition by Member States as regards permits for gambling operations, or at least gambling on the Internet. In other words, that ruling means, in his view, that the Member States may independently conclude that the legal

7 Senate of the Netherlands, 2007–2008, 30362, no. F. 8 House of Representatives, 2008–2009, 24557, no. 93, and 2008–2009, 24557, no. 95. 9 House of Representatives, 2009–2010, 32264, no. 1. 10 House of Representatives, 2009–2010, 24557, no. 102. 213

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conditions and control mechanisms in the Member State of origin do not offer sufficient guarantees for protection of their own citizens.11 There are also a number of other developments in the Dutch gambling arena that have led to quite a lot of debate. These concern in the first place the negative impact of the economic crisis – together with increased taxes on gambling and the introduction of the ban on smoking – on the profits generated by Holland Casino and the gambling arcades.12 It should also be noted that the commercial TV stations RTL and SBS, as well as other companies concerned, recently concluded an amicable settlement of EUR 50 million with the Public Prosecution Service to avoid prosecution for illegal practices regarding promotional games of chance on television.13

4. Future Regulation of Gambling Rather than list various other particular issues, it is perhaps more useful to now look to the future and to consider what needs to be done in general as regards regulating gambling in the Netherlands. My basic assumption is that the Member States will remain responsible for regulating gambling, at least for the foreseeable future. This is apparent not only from the case law of the European Court of Justice but also from the discussion within the European Council’s Working Group on Gambling and the dominant mood within the European Parliament.14 This does not mean, however, that the existing situation will or should continue, including in the Netherlands. With a view to the discussion of future regulation of gambling, I would like to consider four different issues. These do not so much concern regulation in the narrow sense of the word but rather the organisation of the Dutch gambling market as such. The first of these issues is whether it would be a good idea to integrate the Dutch State Lottery and De Lotto and – why not? – the ‘Good Causes Lotteries’ into a single national lottery. Such lotteries already exist in Belgium, France, and the United Kingdom, so why not in the Netherlands? Why should a small 11 House of Representatives, 2009–2010, 24557, no.  102. See also the Opinion of Advocate-General P. Mengozzi in the consolidated cases of Markus Stoß v. Wetteraukreis et al., C‑316/07, C-358/07 to C-410/07. 12 See, for example, Holland Casino’s annual report for 2009: Jaarverslag en jaarrekening, Hoofddorp, Holland Casino, 2009, p. 22. 13 See the report (in Dutch) in the NRC-Handelsblad newspaper on 5 November 2009. 14 See, for example, Council of the European Union, Legal Framework for Gambling and Betting in the Member States of the European Union. Presidency Progress Report, Brussels, 25 November 2009, no. 16571/09, MI 446, and European Parliament (Rapporteur: Christel Schaldemose), Report on the Integrity of Online Gambling, Brussels, 17 February 2009, no. A6-0064/2009. 214



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country like ours be ‘blessed’ with such a hotchpotch of different lotteries? Merging the Dutch lotteries in this way would put an end to the competition between them and would consequently mean the end of aggressive marketing strategies to increase – or at least maintain – their market share.15 It would also mean the end of cash prizes (i.e. jackpots) that currently run to 10 or 20 million euros, thus countering the effect such prizes can have as regards encouraging people to participate in lotteries. Merging all the lotteries would also produce a far more transparent situation for participants than we have at present. Finally, but no less importantly, such a merger would considerably simplify supervision of gambling, certainly if such supervision were to remain the task of a single body, as is in fact the intention. It goes without saying that there would be a great deal of opposition to such a merger, for a wide range of reasons. The Dutch State Lottery is one of the oldest state-owned enterprises in the country, and will not be happy about abandoning its history. All kinds of organisations in the world of sport will be against the closing down of De Lotto because they fear a loss of income. Moreover, all the various institutions and associations that systematically receive large amounts of money from the ‘Good Causes Lotteries’ will undoubtedly object too. I believe, however, that the Government should not simply back down in the face of all these forces acting against the simplification of the lottery sector. There are enough arguments for at least placing such a merger on the political agenda and for investigating the pros and cons.16 I fully realise that this will already be difficult enough because of the considerable number of ex-politicians on the boards of these lotteries. Political lobbying is ingrained within the lottery sector. Given that it is therefore uncertain that such a merger of the various lotteries would be politically feasible, I would like to consider a second question, namely – if such a merger does not in fact go ahead – whether it is not now time to do two things: firstly transfer the money that De Lotto and the other lotteries devote to ‘good causes’ to the public purse – as is already done with the ‘profit’ from the Dutch State Lottery – and secondly allow Parliament to decide how that money should be used. Given the history, in particular, of the ‘Good Causes Lotteries’ – their major role in financing the main political blocs in the Netherlands – it is understandable that they will not wish to give up their role of doing good; on the other hand, 15 One might refer, for example, to the billboards along major roads on which ‘Dutch celebrities’ enthusiastically sing the praises of jackpots of 20 million euros, the enormous number of advertising leaflets that are constantly distributed door-to-door, and the full-page newspaper adverts in which the overjoyed representatives of the ‘good causes’ thank the generous donors. 16 In this regard, one can of course build on reports such as that by Baarsma, B., Gerritsen, M. and Leenheer, J., Better Chances for Charity Lotteries, Amsterdam, SEO-Economisch Onderzoek, 2007. 215

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their original goal has long been forgotten and there are currently no reasonable arguments why they should continue to play Santa Claus with other people’s money.17 I believe that it is high time to organise the distribution of the income generated by all the Dutch lotteries in a democratic manner and to entrust the work involved to Parliament. So as to prevent Parliament devoting that income to items far removed from what we now refer to as ‘good causes’ – something not entirely inconceivable in times of crisis – the money concerned should probably be earmarked by law for those causes. Assuming again that this intervention in the gambling market is not in fact feasible, the lotteries concerned should at the very least be compelled to provide greater transparency regarding the actual chance that people have of winning – or not winning – a prize. At the moment, no ordinary person is in a position to compare his chances of winning in the various lotteries. Indeed, insiders have admitted to me that they themselves are also unable to explain the differences and similarities as regards the likelihood of winning. Simplifying the structure of prizes would also make it significantly easier to supervise gambling. The third issue that I would like to consider is whether it is not time to reorganise the casino sector. That question is prompted in the first place by the fact that the distinction between the casinos run by the Holland Casino foundation and local gambling arcades – which also often call themselves ‘casinos’ – has become extremely blurred: at both types of premises, the focus is nowadays on gambling machines. There are still significant differences, however. Holland Casino is a state-owned enterprise, while the local gambling arcades are privately owned (the market is in fact currently dominated by three large companies).18 Holland Casino’s various branches are all much larger and naturally more prestigious than the local gambling arcades. One should also not lose sight of the fact that at Holland Casino’s premises table games (roulette, black jack etc.) are also permitted but not at gambling arcades. These differences do not, however, need to form an insuperable obstacle to the intervention in the sector that I have in mind, namely a merger between Holland Casino and the private organisations to produce a state-owned enterprise as in Finland or Norway. Such a reorganisation would in any case put an end to competition between Holland Casino and the private sector. Players would know more clearly what they could expect at casinos and supervision of the sector would be made significantly simpler. Another rather important consideration is that control of gambling addiction – something that, however one views it, is still most frequent

17 Schmitz, B., Van goede doelen en loterijen. Een biografie van de Stichting Algemene Loterij Nederland (Nijmegen, Valkhof Pers, 2009). 18 Regioplan, Speelautomatenhallen. Een onderzoek naar de ontwikkeling van speelautomatenhallen in Nederland, Amsterdam, 2009. 216



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at premises of this kind – could be organised more strictly for the whole of the country. There are, of course, a few problems that would need to be overcome before reaping the benefits of such a merger. In the first place, there would naturally be the price that the authorities would need to pay to buy out the private entrepreneurs. Secondly, a redefinition would be necessary of the position of the municipalities vis-à-vis national government in the field of gambling policy. At the moment, it is up to the municipalities to decide whether to issue a permit for opening one or more local gambling arcades. In the situation that I have outlined, this will naturally no longer be the case. Municipalities will not, however, wish to simply relinquish this power because, certainly where large towns and cities are concerned, it forms an important element in their policy, for example, as regards the attractiveness of the town centre.

5. Finally, the European Dimension If the Netherlands were in fact to decide to reorganise its gambling market along the lines outlined above, it would naturally do well to take account as far as possible of developments in the other Member States of the European Union. The reason for doing so goes beyond the country’s own interest in this regard and concerns the fact that – from the point of view of the citizens of Europe – how the Member States organise their gambling market is something that is becoming increasingly important. After all, partly thanks to the creation of the Internal Market, large numbers of people nowadays travel throughout the European Union and are increasingly engaging in gambling in other Member States. It is therefore becoming increasingly important for them to know that gambling – in whatever form or variety – complies – or at least is intended to comply – with a number of minimum requirements in all the Member States, not least as regards fairness and trustworthiness. Countries like the Netherlands that are represented in the Working Group on Gambling – even if initially only with a view to protecting their own citizencustomers – should therefore no longer content themselves with comparing their gambling market and gambling policy but should initiate a process that would lead, on the one hand, to the establishment of minimum standards for regulating national lotteries, casinos, sports betting and Internet gambling and on the other to a certain uniformity in the structure and operation of the official bodies that are charged with supervising gambling within the Member States. Such a development would in the short and medium term create the clarity regarding the gambling sector to which European consumers are entitled. In the longer term, it would gradually promote application of the principle of mutual recognition because it would create more mutual trust between the Member

217

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States. That includes control of the negative social aspects that are quite simply associated with the gambling sector. This will involve such things as control of addiction and combating criminal activity, ranging from fraudulent games right up to control of parts of the gambling sector by organised criminal groups. The Member States must be jointly able to make the necessary efforts to control these problems and, where necessary, must be prepared to cooperate across borders in order to do so. It is no longer possible for individual Member States to effectively combat criminal groups that organise illegal international betting on sports competitions. This needs to be done within a multinational framework, where necessary with the aid of Europol and Eurojust.

218

The New French Legislation on Online Gambling in its European Perspective Fabienne Péraldi Leneuf

1. Introduction For few months, the online gaming and betting sector has known a series of twists and turns in France as well as in the European Union. We went from a situation where, until the middle of 2009, the legitimacy of online gambling services was uncertain, to a much more clearer stand from the Community side given the judgment of the European Court of Justice on 8 September 2009.1 The Court, in Santa Casa, legitimises the Portuguese public monopoly on online gambling and sets precise rules about the application of free movement principles for online gambling and the nature of the limitations placed on national systems by Community Law. The case was somewhat of a surprise because numerous observers had believed that the previous case law of the European Court of Justice might be interpreted as being rather liberal and in line with the position of the European Commission which had clearly hoped that the States open their market. Thus, while France was discussing a bill dealing with a measured and regulated opening of its online gambling market, Community case law was a real bombshell. This sparked off many political stances and new legal questions concerning the reform arose. Nevertheless the French National Assembly passed the bill on its first reading on 13 October 2009, its consideration by the Senate is postponed.2 The aim of this contribution is to present the perspective of French domestic case law and legislation and its relationship with Community Law. It will be considered in three steps: first, the state of the French legislation and case law as it existed before the rise case law from the European Court of Justice (subsection 1 Case C-42/07, Liga Portuguesa de Futebol Profissional and Bwin International Ltd/ Departamento de Jogos da Santa Casa da Misericórdia de Lisboa, [2009] ECR I-76. 2 The bill was subsequently passed by the National Assembly on 6 April 2010 however the salient issues covered in this contribution remain relevant. Littler et al. (eds.), In the Shadow of Luxembourg, 219–236 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

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2); then secondly, the response of French case law to Community case law will be considered (subsection 3). Last but not least, the new French legislation will be examined in light of the current state of the European perspective (subsection 4).

2. The Public Organisation of French Gaming and Betting before the European Case Law 2.1. Former Monopolistic Structures The organisation of gaming and betting in France is grounded on the principle of a general prohibition which has been in force since the 19th century and linked to the dangers represented by the games,3 particularly in the objective of preserving public and social order. Indeed it was the purpose of legislation adopted on 21 May 1836 and 2 June 1891, which prohibited as a general rule the organisation of gaming, regardless of form, due to the inherent risks of gaming activities. Without dwelling on the history of gaming regulation in France, one can observe that parallel to the general prohibition, these same texts granted derogations to certain gaming activities: those which generated revenue for noble causes (culture, tourism, veterans) or for small-scale gaming activities (lotto in fair, local small lotteries). Derogations extended to slot machines in 1907,4 which were first reserved to solely to casinos and then exceptionally authorised in other places. With the authorisation to exploit slot machines, the games ‘of circle’ like roulette, the games ‘of counterparts’ were authorised in the same places and then submitted to a special authorisation procedure.5 Moreover the casinos quickly became a

3 Loi of 21 May 1836 portant prohibition des loteries, bulletin des lois 1836 9° s, b 421 no. 6282, and Loi of 2 June 1891 qui interdit les paris sur les courses de chevaux et de lévriers, bulletin des lois 1891, 12ès., b. 1405, no. 23707. 4 Loi of 15 June 1907 autorisant les casino dans les stations thermales, balnéaires et climatiques, no. 1907-06-15. 5 Article 1 of Décret no. 59-1489 of 22 December 1959 portant réglementation des jeux dans les casinos des stations balnéaires, thermales et climatiques, ‘Peuvent être autorisés dans les casinos les jeux de hasard suivants: la boule et le vingt-trois, (…) la roulette, la roulette dite américaine, la roulette dite anglaise, le trente et quarante, le black-jack, le craps, le stud poker de casino et le punto banco, (…) le baccara chemin de fer, le baccara à deux tableaux à banque limitée, le baccara à deux tableaux à banque ouverte et l’écarté, les jeux pratiqués avec des appareils (…)qui procurent un gain en numéraire’. 220



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considerable source of tourism and thus a considerable financial resource for the communes, the local authorities, where they were located.6 Since 1930, derogations have been extended to horse betting first, which have taken the form of pari-mutuel and not fixed odds betting. With the pari-mutuel betting, gamblers bet mutually against each other whereas with fixed odds betting, each gambler bets separately against the operator who takes a risk according to the odds previously agreed upon with the gambler. In 1933,7 derogations were granted for a lottery and then later other kinds of betting like sports betting.8 All the other games, which are not the subject of these exceptions, remain prohibited. Currently, before the legislative reform, these derogations relate to lotteries and betting in the bricks and mortar sense as well as online for just operators, namely the ‘Françaises des jeux’ (FDJ) and the ‘Pari Mutuel Urbain’ (PMU). These derogations are today concerning, for lotteries, ‘brick-and-mortar’ and online betting, two operators: the ‘Française des jeux’ (FDJ) and the PMU. The FDJ succeeded to the National Lottery, National Lotto, then the National Lottery Society and National Lotto by a decree in 1978.9 The Council of State, in a decision of 22 March 1978,10 legitimised this creation by stating that: ‘the article 136 of the Finance Act 31 May 1933 empowering the government to set by decree the conditions to organise a lottery, derogating to the prohibition enacted by the 21 May 1836’s law, and article 34 of the

6 Article 1 of Décret of 6 November 1934, ‘Il est institué au ministère de l’intérieur une commission chargée d’examiner les demandes d’autorisation et de renouvellement d’autorisation de jeux dans les cercles et casinos’ (‘The Ministry of the Interior will establish a commission charged with the examination of requests for the authorization or the renewal of authorization for games within the circles and casinos.’) Article 2 of Décret of 22 December 1959, supra note 5: ‘Les autorisations de jeux (…) sont accordée par arrêté du ministre de l’intérieur aux casinos des stations balnéaires, thermales et climatiques’. (‘Licences for games (…) are granted by an order of the Minister of the Interior to casinos in seaside resorts, spa resorts and “climatic” resorts.’) Source: Swiss Institute of Comparative Law, Study of Gambling Services in the Internal Market of the European Union, Final Report, 14 June 2006. Available at: . 7 Article 136 of the Loi of 31 May 1933 portant fixation du budget général de l’exercice 1933. 8 Trucy, F., Les jeux de hasard et d’argent en France. Rapport d’information no. 223 (2001–2002) of 13 February 2002, fait au nom de la commission des Finances, du contrôle budgétaire et des comptes économiques de la Nation. 9 Décret no. 78-1067 of 9 November 1978 relatif à l’organisation et à l’exploitation des jeux de loterie as amended by Décret no. 2006-174 of 17 February 2006 relatif à l’organisation et à l’exploitation des jeux de loterie autorisés and Décret no. 2006-175 of 17 February 2006 relatif à l’organisation et à l’exploitation des jeux de pronostics sportifs. 10 CE 22 March 1978, no. 00704 03723 03724. Author’s own translation. 221

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Constitution of 4 October 1958 not having put a stop to this capacitation, the government has legally diversified the mechanism of the national lottery by creating the “loto”, “added to sufficient conditions of advertising and public control”’. The FDJ is a ‘société d’économie mixte’ (SEM) that is to say a limited company in which the state owns 72% of the share capital and whose statute is approved by the Minister of Finance. It holds the monopoly on lotteries and sports betting, offline and until 2010, online.11 It is important to clarify that a SEM is mainly held by one or more public body (the State, a ’collectivité territoriale’12 or any other public institution). However at least one private person has to be a shareholder of the SEM, including another SEM. Since an act of 2 January 2002, participation by public entities is restricted to an 85% shareholding. The motivation for relying on a SEM is that the relevant public authority and co-contracting parties (shareholders) incorporate public interest considerations into the objectives of the SEM whilst it offers certain advantages and the legal flexibility associated with a private undertaking. However we have to specify that the Council of State in a case called ‘Rolin’, of 27 October 1999,13 stated the FDJ does not hold a public service mission in contrast to that granted to casinos. Indeed the latter, as concession holding establishments, ‘combine to bring about development of the tourist and seaside resort and the specifications, taken as a whole, have the characteristic of a public service concession and thus of an administrative contract’. 14 The FDJ is thus linked to the State but without any service public mission. This link manifests itself, in addition to the capital sharing, by a convention signed

11 For further information see the Report of the Swiss Institute of Comparative Law, supra note 6. Article 42 of law no. 84-1208 of 29 December 1984, amended by law no. 931352 of 30 December 1993 and law no. 97-1269 of 30 December 1997 authorised the creation of the ‘Loto Sportif ’ which is organised and exploited by the FDJ. It is defined as ‘a game with a combination of chance and the results of sporting events’. 12 A ‘collectivité territoriale’ is an administrative structure which is distinct from central government in relation to a specific territorial area. 13 Req. No. 171169, Corneloup, V.,  JCP G Semaine Juridique (édition générale), no. 30, 26/07/2000, pp. 1497–1499. The applicant, before the Conseil d’Etat, undertook to have the regulations permitting the FDJ to offer ‘Bingo’ and ‘Bianco’ quashed. The court considered that it did not have jurisdiction to hear the case because the FDJ does not hold a public service mandate. 14 See. Jorion, B., ‘Les délégations de casinos’, . CE 25 March 1966, ville de Royan, Rec. p. 237; CE 4 July 1984, Société d’exploitation du casino de Luchon, Req. n. 51179; CE 19 February 1982, Société anonyme Trouville balnéaire, tab. p. 618). Author’s own translation. 222



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in 1979 and updated in 2006 for the regulatory recasting of the sector.15 The result is that half of the members of the board of directors are representatives of the State. The FDJ’s chairman, who is entitled to establish the rules of the games, is named by a decree of the French President, on a proposal of the Board of directors. The order of 22 February 200616 also imposes on the FDJ a degree of supervision of its mission concerning the adoption of new games, the action plan concerning the provision of information to gamblers, excessive gaming and the prohibition on those under 16 years old from gambling. This order also established an advisory committee for the implementation of the supervision of the games and for the responsible gambling policies. As for the PMU, it is an economic interest grouping (GIE) joining fifty-one horse-racing societies. Within the meaning of the article L251-1 of the commercial code: ‘The aim of the grouping shall be to facilitate or develop the economic activity of its members and to improve or increase the results of this activity. The aim is not to make profits for the grouping. The activity of the grouping must be linked to the economic activity of its members and may not be additional to this.’ By ‘economic activity’, commercial, industrial, agricultural, artisan activities and liberal professions are targeted. The PMU was created in accordance with Decree no. 97-456,17 which authorises the horseracing societies to institute ‘common incorporated bodies of which they provide for the effective direction and which combine to bring about the realisation of their mission’ (Article 12). However Article 3 requires the minister to grant to the horseracing societies authorisations to organise race meetings on an annual basis. Such permission is granted taking into consideration the opinion of the prefect. Furthermore the ministers of finance and of agriculture appoint the director of the PMU, thus closely linking the director with the State. The PMU benefits, like the FDJ, from a monopoly on horserace betting outside the racetracks, the betting inside are entrusted to another GIE, the PMH. The originality of the PMU’s model is founded upon the fact that in relation to the

15 Décret no. 2006-174 of 17 February 2006 relatif à l’organisation et à l’exploitation des jeux de loterie autorisés. 16 Order made pursuant to Décret no. 78-1067 of 9 November 1978 relatif à l’organisation et à l’exploitation des jeux de loterie autorisés par l’article 136 de la loi du 31 mai 1933, supra note 9, and article 48 de la loi no. 94-1163 of 29 December 1994 et du décret no. 85-390 of 1 April 1985 relatif à l’organisation et à l’exploitation des jeux de pronostics sportifs autorisés par l’article 42 de la loi de finances pour 1985. 17 Décret no. 97-456 of 5 May 1997 relatif aux sociétés de courses de chevaux et au pari mutuel. 223

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winnings realised outside of the racetracks 74% of the stakes waged are returned to the players, the State receives up to 12% and the remaining amount goes to the horseracing industry. This clearly impacts upon the national studs and thus contributes largely to the financing of the equine industry. For this reason the PMU is a real institution in France. As a result, each and every project dealing with the opening of online horse betting causes some parties to be concerned about the possible reorientation of revenues towards other societies and parties outside of the equine industry. Undoubtedly this is the reason why the Council of State referred to the ECJ a request for a preliminary ruling concerning the compatibility of this monopoly with European Law. In conclusion, both of the French institutions designated for the organisation and for management of online gaming and betting, despite their private status, held a monopoly that made them highly dependent on the State: in each case, they are submitted to basic specifications and to rules published in the Journal officiel de la République française, to a defined period of time, to non-tax levies paid to the State budget, to financial and economic control by the State, to the general inspectorate of finances and of the Court of Auditors (Cour des compters). In return, despite that they do not hold a public service mission, they have to pursue public interest aims. 2.2. The Pursuit of General Interests Linked to Public or Social Order Curiously, the general interest objectives inscribed in French legislation, except for the justifications appearing in the text dealing with the general gambling prohibition in 1936, appeared relatively late in a historical sense. These objectives appeared in the 1978 decree granting the FDJ the monopoly for lotteries and other games of chance.18 The first article of the decree states: ‘it can be proposed to the public an offer of lottery which has to respect the following objectives: granting the integrity, the security, the viability of games’ operations and looking after the transparency of their exploitation; supervising the games’ consumption in order to prevent the addiction’s development. Taking care of not encouraging the under 16 years old to play. Canalizing the games’ demand in a system controlled by the public authority, in order to prevent the risks of a fraudulent or criminal exploitation of gambling and to fight against money laundering’. These objectives were confirmed many times by the Council of State. In a case, 15 May 2000,19 for example, it found that the protection of public order and

18 Supra note 9. 19 CE 15 May 2000, no. 202666. 224



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consumers are overriding reasons relating to the public interest justifying the FDJ’s monopoly as defined by the case law of the ECJ. According to the High administrative court, these provisions (those from the 1978 decree) ‘are dealing with the protection of public order by limiting the games’, stop ‘the proliferation of games of chance, channels and operators’, prevent ‘the risks of fraud, swindling and laundering of illegal funds’. ‘As a result, by entitling, without appealing to competition, the lottery’s exploitation to a SEM presenting the characteristics before mentioned (the decree), does not affect out of proportion with the objective to be achieved, the freedom to provide services and the freedom of establishment, once the operator’s procedure choice and the modalities of the State’s control are suitable for achieving the objective which they pursue and not go beyond what is necessary in order to attain it’.20 Subsequently, the decrees adopted in 2006 and 2007 were designed to reform the principles of gaming and betting’s authorisation and derogations.21 While the 2006 decree authorises online sport betting, decrees no. 2007-728 and no. 2007-729 suppress the sentence ‘Taking care of not encouraging the under 16 year olds to play’. Furthermore it directly prohibited, since 1 July 2007, the sale of lottery and sports betting services to minors, even for those minors otherwise emancipated under French law, in brick-and-mortar and online contexts. In addition, these decrees establish that anybody can be held responsible for failing to abide by this provision even if they have been misled about the age of underage customers. This rise in interest from the French public authorities is not entirely accidental. It constitutes a response to the requirements of Community Law which prohibit measures restricting the freedom to provide services while admitting some derogations as found in Article 46 EC, namely: public order, public security, public health and also for overriding reasons relating to the public interest. On the one hand, it allows for the provision of gambling services to be limited whilst on the other hand it seeks to supervise this offer. It is true that since the Schindler case, the ECJ is very careful to preserve the competence of Member States-to determine whether to limit or prohibit gambling in order to achieve their objectives.22 20 Swiss Institute of Comparative Law, supra note 6, 21 Décret no. 2006-175 of 17 February 2006, supra note 6; Décret no. 2007-728 of 7 May 2007 relatif à l’organisation et à l’exploitation des jeux de pronostics sportifs autorisés par l’article 42 de la loi de finances pour 1985 et modifiant le décret no. 85-390 du 1er avril 1985 and Décret no. 2007-729 of 7 May 2007 relatif à l’organisation et à l’exploitation des jeux de loterie autorisés par l’article 136 de la loi du 31 mai 1933 et par l’article 48 de la loi no. 94-1163 du 29 décembre 1994 et modifiant le décret no. 78-1067 du 9 novembre 1978. 22 Case C-275/92, Her Majesty’s Customs and Excise v. Gerhart Schindler and Jörg Schindler [1994] ECR I-1039. 225

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For the United Kingdom which at the material time in question had total ban on large-scale lotteries, the objective was to: ‘to prevent crime and to ensure that gamblers would be treated honestly; to avoid stimulating demand in the gambling sector which has damaging social consequences when taken to excess; and to ensure that lotteries could not be operated for personal and commercial profit but solely for charitable, sporting or cultural purposes.’23 The Court has chosen to address these arguments on the whole and to attach them to an existing category concerning the freedom to provide services: the protection of the recipients of the service and generally of the consumers and also the protection of social order. It acknowledges that it is not possible to ignore considerations of a moral, religious or cultural nature which surround lotteries like every other games of chance in order to avoid them to be a source of private profit. The ECJ explains: ‘lotteries involve a high risk of crime or fraud, given the size of the amounts which can be staked and of the winnings which they can hold out to the players, particularly when they are operated on a large scale. … [T]hey are an incitement to spend which may have damaging individual and social consequences.’24 Subsequently the ECJ then admits another justification, ‘which is not without relevance, although it cannot in itself be regarded as an objective justification, is that lotteries make a significant contribution to the financing of benevolent or public interest activities such as social works, charitable works, sport or culture.’25 Then, in the Läärä and Anomar cases,26 it was estimated that the casinos’ monopolies in question constituted an imperative characteristic of a high symbolic value which aims to reach general interest objectives with the legitimate social endings as the ‘fair play’ and the possibility to ‘obtain some benefit for the public sector’. The Court considered that a limited authorisation of gambling by granting or conceding special or exclusive rights to some organisms is in line with the pursuit of such general interest objectives. European judges acknowledge that member States have a large margin of discretion in the definition of these objectives

23 Ibid., para. 57. 24 Ibid., para. 60. 25 Ibid., para. 60. 26 Case C-124/97, M. J. Läärä, Cotswold Microsystems Ltd, Oy Transatlantic Software Ltd v. Kihlakunnansyyttäjä (Jyväskylä) and Suomen valtio (Finnish State) [1999] ECR I-6067; Case C-6/01, Associação Nacional de Operadores de Máquinas Recreativas (Anomar) and Others v. Estado português, [2003] ECR I-8621. 226



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which, in the light of the specific social and cultural features of each Member State, deal with the protection of social order, the manner in which lotteries are operated, the size of the stakes, and the allocation of the profits they yield. Step by step the principal issue confronting the French government from this case law centres around the existing margin of discretion during the regulatory reform within which it will attempt to combat crime and fraud whilst protecting consumers against addiction and the dangers associated with online gambling.

3. The Adaptation of French Case Law to European Case Law Gaming and betting are considered by Community law as relating to the freedom to provide services stated in Article 56 TFEU (ex 49 EC). They are in fact economic activities characterised by supplying a service for consideration with a view to a financial gain for the player. Primary law applies specifically to games of chance because this sector remains excluded from the scope of secondary legislation, such as the Services Directive,27 the Directive on Electronic commerce,28 and the Audiovisual Media Services Directive.29 This sector cannot be subject to harmonization because of the specificity of these activities that results from the implementation of policies relating to public order and consumer protection, by the Member States.30 As a result, only the European judge can set about influencing the regulation of this sector, on a case by case basis, as part of the control he exercises on restrictive national regulations while taking into account the ‘risks’ that these games present thus resulting in a larger margin of discretion for the State in this domain when compared with other economic activities. The ECJ will offer guidance to the national court as to how to check that the justifications are suitable to attain the alleged public interest objective, that restrictions are proportionate to this objective and that the legislation is non discriminatory. This is the reason why the European Court of Justice brought up principles and imposed some constraints on the Members States. From Schindler31 to Santa

27 Directive 2006/123/CE on services in the internal market, OJEU L 376. 28 Directive 2000/31/CE on certain legal aspects of the information society in particular Electronic commerce in the Internal Market, [2000] OJ L 178. 29 Directive 2007/65/CE modifying Directive 89/552/CEE of Council on the coordination of certain provisions of laws, regulations and administrative provisions of Member States concerning the pursuit of television broadcasting activities, [2007] OJ L 332. 30 Report of Evelyne Gebhardt, December 15, 2005 on the proposal from European Parliament and Council on services in the internal market [COM (2004) 2], 2004 /0001 (COD). 31 Schindler, supra note 22. 227

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Casa through the Gambelli32 and Placanica33 cases, by a critical assessment of the Italian regime for not having organised consistently and systematically the opening and regulation of online gambling, the Court specifies a third way. It takes a path between the liberal perspective recommended by the European Commission and that of monopolistic regulation, recommended by some member States. The notion of consistency in national gambling legislation, which appears in the Italian cases is at the heart of the problem. Italy does not ban gaming and betting, but gives licences to concessionaries authorised by the ministry or habilitated organisms. The accused, two Italian companies linked to foreign companies, considered the prohibition to be linked to such companies in order to put bets and to thus receive some services offered in Italy with the Internet is contrary to European law. As soon as it deals with a limited number of authorisations for offering online gambling services, the ECJ explains what it requires from national legislators: legislation must be ‘suitable to guarantee the realisation of the objective alleged’, that is to say they have to limit these activities in a consistent and systematic way.34 As a result, the Italian State inciting and encouraging consumers to participate to lotteries, to games of chance and to bet so that the public treasury gets financial profits, does not pursue a consistent policy. In the Placanica case, the Court states that when the games are authorised, the objective of fighting criminality by submitting active operators in this sector to control and by canalising these gambling activities in these controlled channels may be admitted. Market expansion may be consistent with restrictive measures given that: ‘authorised operators must represent a reliable, but at the same time attractive, alternative to a prohibited activity. This may as such necessitate the offer of an extensive range of games, advertising on a certain scale and the use of new distribution techniques’.35 The ECJ adopts a neutral stance as to whether governments should open their markets to multiple private operators. It appears that, in cases where governments decide to open the market, the case law is more demanding in terms of the proportionality test when applied to the system introduced in the eyes of the alleged public interest objectives.

32 Case C/243-01, Criminal Proceedings against Piergioro Gambelli and Others [2003] ECR I-13031. 33 Cases C-338/04, C-359/04 and C-360/04 Criminal proceedings against Placanica, Palazzese and Sorricchio, [2007] ECR I-1891. 34 Gambelli, para. 67. 35 Placanica, para. 55. 228



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French courts, when confronted with claims that gambling legislation that does not allow other operators than those designated by the law to enter the market is in breach with Community Law, sometimes adopt contradictory positions revealing their hesitation and uncertainty regarding Community Law. The Cour de cassation, on 10 July 2007, in the Zeturf case,36 which was decided only a few months after Placanica, nullifies a court of appeal ruling compelling the company Zeturf to stop its online horse betting activity, the latter finding that Zeturf ’s activity harms the monopoly held by the PMU. The Cour de cassation in its ruling adheres strictly to the ECJ’s rulings in Gambelli and Placanica. It observes that when limited authorisation exists, only two objectives can justify restrictive measures; the objective of preventing gambling from being exploited for criminal or fraudulent purposes by confining supply within controlled channels on the one hand, and the diminution in gambling opportunities on the other hand, but only if this coincides with a consistent and systematic policy. On this basis, the Cour de cassation firstly held that the fact that the State benefits from this activity is not sufficient per se to condemn the French legislation as being incompatible with Community Law. Subsequently, in the contradicting decision of the court of appeal, it was found that France leads a policy which does not fit with the demands of the consistency requirement. The Cour de cassation considers that the freedom to provide services can only be limited by regulations justified by overriding reasons of public interest solely when this interest is not already protected by the Member State of origin, so as the State of destination has to take into account the controls and checks operated in the State of origin. It is clear that the Cour de cassation claims the full application of principle of mutual recognition of national regulations as set in the Cassis de Dijon case dealing with commercial regulations, and takes up an unanswered argument given in Gambelli. Thus the failure to recognise already secured and equivalent objectives in the State of origin is contrary to the consistency principle. The Cour de cassation did not consider it useful to ask a question referred for a preliminary ruling to the ECJ. Contrary to what the Cour de cassation decided the Council of State, on 9 May 2008,37 in an action for annulment by Zeturf against a decision of the administration rejecting its request questioning the repeal of the 1997 decree concerning horseracing societies, decided to refer a preliminary question to the ECJ concerning the interpretation of the art. 56 TFEU (ex. 49 EC). The Council of State, after admitting that the limited authorisation conceded to some organisms restricts the freedom to provide services, considers that the proportionality control, which has to be made, must be clarified by the Community judge. According to 36 Cour de Cassation 10 July 2007, no. 06-13.986, Recueil Dalloz 2007 p. 2359. 37 CE 9 May 2008, Société Zeturf Limited, no. 287503 229

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

the approach of the Council, if the State permits an expansionist policy, it thus considers that the monopoly is necessary in order to achieve objectives such as the protection of social order regarding the effects of gambling on individuals and society, of public order so as to fight against a criminal and fraudulent use of gambling, and to the economic goal of rural development. The Council of State deems it necessary to know whether the consistency principle allows a hierarchy to be formed between different objectives and how any contradiction between them should be resolved. The pending case should be held soon and will surely raise some doubts.

4. French Legislation in European Perspective Today 4.1. The Conditions of the French Reform The uncertainties of French judiciary are inevitably reflected by the public authorities and then on the French legislator. The latter was called upon to modify the law, encouraged by the European Commission which sent to the government, on 18 October 2006, a letter of formal notice concerning the incompatibility of the legislation dealing with gambling regarding Community law. Following the unsatisfactory answer given by the government to the Commission 12 January 2007, the latter delivered a reasoned opinion to France on 27 June 2007. A bill dealing with the opening to competition and the regulation of online gambling was thus presented 25 March 2009 on the desk of the National Assembly.38 At this stage, it seems that both the European Commission and the French government are in favour of an opening, admittedly controlled, but nevertheless effective, of online gambling, in line with Community Law concerning the provision of services. The Commission permits regulation based upon the attribution of national licences in order to provide a gambling service on French soil and the French approach given that the principle of ‘mutual recognition’ does not apply to online gambling licences. Nevertheless, it calls upon precisions on the manner authorities ‘will take into account, when evaluating the authorisation’s requests, the demands (…) to which the asking operator is already submitted in its establishment country’. The ministry of finance also has to clarify how the future authority of online gambling regulation will check, for the obtaining of 38 See Rapport de la Mission sur l’ouverture du marché des jeux d’argent et de hasard confiée a Bruno Durieux, March 2008. See Avis de la Commission des affaires économiques sur le projet de loi relatif à l’ouverture à la concurrence et à la régulation du secteur des jeux d’argent et de hasard en ligne (no. 1549), Daniel Fasquelle, 15 July 2009. See Rapport de M. Jean-François Lamour, 22 July 2009. 230



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a French licence, the criteria which would be already fulfilled abroad by those operators having licences in other Member States. It also has to specify the motivation behind Article 39 of the bill which imposes on legal operators, for the purposes of taxation, the duty to have a representative established in France. It must provide an analysis concerning the necessity of setting a limit on the return rate, that is to say the part of the stakes that are redistributed, specifying the link between addiction and the return to gambler rate. Last but not least, additional information has to be furnished about the necessity to have means to enable the recording of data flows in France and on the recognition of a property right held by organisers of sports events. On this point, the ministry recalls that the recognition of such a right is justified by the necessity to protect the ethics of sporting competitions.39 The answers had apparently satisfied the European Commission since it gave a positive opinion in June 2009 on the bill regulating online gambling and opening to competition in three areas reflecting demand from online gamblers, namely: – Sport betting: the bill allows the operators to propose, as one chooses, fixed odd betting or pari-mutuel, and develops a supervised offer of live betting;

– Horse betting;



– Online poker.

However recent case law could cast doubt upon this approach to market opening, and on the hasty interpretations grounded essentially on the idea that monopolies granted to operators are disproportionate restrictions where a Member States wishes to maintain the monopoly approach but expand the gambling market at the same time. The starting point of this evolution is the Opinion of Advocate General Yves Bot delivered on 14 October 2008 in the Santa Casa case.40 This Opinion marks the start of a radically new view regarding the common interpretation of previous cases. According to the Advocate General, the objective of realising an internal market is not relevant for gambling activities because consumers do not benefit from them as is the case for other economic activities covered by the Treaty. Bot recommends treating gambling as a particular activity and consequently to adjust the application of the proportionality principle to restrictions in this sector. This logic leads him to clearly reject the application of the principle of mutual recognition and of equivalence resulting from the Cassis de Dijon case as it is traditionally applies in the internal market. The Advocate General thus

39 Source: Dépêches JurisClasseur, 10 June 2009, 635. 40 Opinion of Advocate General Bot, delivered on 17 December 2009, in Santa Casa. 231

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observes the necessity of a large margin of discretion for the States so as to define their level of protection and the objectives to be pursued.41 However, this margin of discretion is reinforced by the necessity to use the precautionary principle in this domain, following an approach grounded in risk theory. It can justify the holding of a monopoly granted to a public operator for proportionate reasons dealing with the fight against crime. The proportionality test executed by the national the judge has to consequently be restrained and solely directed to verify that there is no manifest misappropriation of these objectives by the Member State. On 8 September 2009,42 the Court of Justice rendered its Santa Casa ruling and confirms conclusions reached by Advocate General Bot, causing either subtle points of disagreement. The ruling is crucial on numerous points. In particular, grounding on a subtle understanding of the potential risks of online gambling; the Advocate General warns against the unprepared opening of national markets. Above all, this demand of an upstream management of the risks relies on a new situation: the implicit statement by the judge of the incapacity of the law to regulate technology. This approach leads the ECJ, after considering that the Portuguese monopolistic legislation constitutes a restriction to the freedom to provide services, to examine the justifications alleged by the Portuguese government, which exclusively fight fraud and criminality. Recalling the need to pursue a consistent and systematic policy set by Gambelli and Placanica, it considers that the objective alleged according to the ‘higher’ risks presented by this sector, allows the online monopoly of Santa Casa to be maintained and to deny the mutual recognition of the authorisations obtained in other Member States. 4.2. The French Bill regarding European Law This ruling occurred at a determining point for France because the National Assembly received the government’s bill for consideration the day before, 7 September. The opposition immediately challenged the bill regarding the opening of the market and the policy of introducing competition.43 According to those in favour of maintaining the prohibition on online gambling to operators other than the two historic institutions, the argument of the French government saying French law has to be in conformity with European Law would fall following the Santa Casa case. The conditions governing the opening of the

41 Opinion of Advocate General Bot in Santa Casa, supra note 40, para. 258. 42 Santa Casa, supra note 1. 43 Assemblée nationale
XIIIè législature. Session ordinaire de 2009–2010.

Compte rendu
intégral Première séance du mardi 13 octobre 2009. . 232



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online gambling sector to competition could also raise major difficulties which the bill does not settle: could France justify its partial opening while in the mean time maintaining a monopoly over lotteries? Would it have to apply an open policy concerning the granting of licences and calls for tenders too? Is there a danger that the supervision of advertising would be contrary to Community Law? How far could we consider that a licence or authorisation given in another Member State is not in conformity with conforming to French law? Etc. The bill was adopted on its first reading on 13 October 2009. It was amended by the Senate on first reading 24 February 2010, and definitively adopted by the National Assembly, 6 April 2010. The most contentious points concerned firstly the much contested, and yet required by the European Commission, opening up of the market to fixed-odds betting. Secondly, there were the issue of the ceiling on rates of return to players, which the Commission hopes will be increased and thirdly measures designed to fight against addiction, which would not appear to be sufficiently substantial according to the bill’s opponents. The final text of 6 April,44 proposes a measured liberalisation of online gambling, justified by the statement that the sector is expanding and above all by the increase of the illegal market. Thanks to the positive opinion given by the Commission on the bill in March 2009, the text organises as foreseen, an opening of horse-betting in pari-mutuel, sport betting and some table games. Lotteries remain subject to a regime based on monopolisation. Nevertheless this controlled regulation is based on the ‘structuring principles’ which are reflected in the principal innovations of the bill. In particular these concern the general interest objectives, the creation of an independent governmental agency with regulatory powers45 of the regulation of online gambling.46 This body is given a broad mandate to grant market access authorisation, supervise and regulate the market and impose sanctions. Article 1 states that gambling and games of chance are not an ordinary trade or a regular service, as noted by the Advocate general Bot in Santa Casa case. The justifications in the general interest are given in the third article: ‘State policy concerning gambling aims to limit and frame the offer and consumption of the games and to control the offer thereof so as to: 1. Prevent excess or pathological gambling and protect minors; 2. Guarantee the integrity, reliability and transparency of gambling operations;

44 Loi no. 2010-476 of 12 May 2010 relative à l’ouverture à la concurrence et à la régulation du secteur des jeux d’argent et de hasard en ligne, Journal Officiel of 13 May 2010. 45 An autorité administrative indépendante (AAI). 46 Known as ‘ARJEL’, the Autorité de Régulation des Jeux en Ligne. 233

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3. Prevent fraudulent and criminal activities and money laundering and terrorist financing; 4. Oversee a balanced and fair development of the different types of games in order to avoid economical destabilisation of the concerned sectors.’ One observes immediately the adding of the fourth objective compared with 2006 and 2007 decrees which seems to coincide to the French reality of supporting equine and agricultural channels, as previously said. However, its wording is ambiguous because ‘economical destabilisation’ sounds like the matter would simply be to avoid that profits are excessively diverted away from the concerned channels (agricultural and equine). But, for some of them it is a matter of survival, which goes beyond the economical aspect. One should specify that the arguments of ‘economical’ general interests are not considered by the European Court of Justice so as to justify restrictions to freedoms of movement. Nevertheless, one may think that argument of general interest justifies a lower levy on the activities of the PMU and a redistribution or other ‘return’ policy in favour of sports – via the national centre for the sport development – and of the equine industry. The inclusion of these demands coincides with other requirements of the law: the traceability of operators, of operations and the storage of data concerning completed gambling transactions; the total prohibition of sponsoring and conflict of interest, the same types which were in the heart of the Santa Casa case. Provision is also made for the taxation of operators so as to support purposes in the general interest. The mandate of ARJEL(Autorité de Regulation des Jeux en Ligne) also forms part of the structuring principles of the bill. The Authority is an independent government agency with regulatory powers just like the Authority for financial markets. As a result, as an administrative authority, it represents the State and comes under the executive power and, as an independent authority, possesses an organic and functional independency. It constitutes a collect of seven members appointed for their skills, economic, legal and technical. From the functionally perspective, it is vested with a significant amount of power, including the right to initiate legislation, granting market access to operators, supervision of the sector and the adoption of administrative sanctions. Its involvement or contribution to the French gambling policy goes through an advisory mission: it gives advice on legislative and regulatory proposals put forward in the gambling sector. It can propose provisions for the terms of reference defined by the Minister of interior, the Minister for the Budget, the Minister for Agriculture and the Minister for Sport, on the basis of which it grants licences for five years. It also sets the technical characteristics of the platforms and software with which operators must comply, and controls compliances with these requirements.

234



The New French Legislation on Online Gambling in its European Perspective

Its mission is to deliver licences to the online gambling operators on the basis of terms of reference. The central lines for this delivery are strict because the non-European operators or those who have not ratified a tax convention with a provision of administrative assistance in order to fight against fraud and tax evasion are excluded. The law plans to organize a certification of approvals. In other cases, the ARJEL must motivate every refusal, whilst it can only consider reasons linked to the maintenance of public order or drawn from the incapacity of the operator to comply with the regulatory duties. Once the authorisation has been granted, ARJEL ensures that the operators respect the public interest missions of the regime. Not only will it ensure their compliance with the rules but it will also supervise online gambling and will cooperate with regulators of other Member States, control free competition, instruct complaints for abuse of dominant position, refer to the competition council, hold inquiries in this context and auditions and could pronounce administrative sanctions. It must be noticed however that the law organises a division of competences between the ARJEL, in charge of gambling regulation, and the ministry of interior, which keeps the criminal competence with the criminal investigation services. The latter have their powers reinforce by the Article 56 TFEU (ex Article 49EC): fight against illegal websites with the incrimination of online gambling communication service’s provision, blocking of funds in collaboration with the ministry of budget. ARJEL can however refer to the juge des référés (a judge with power to hear urgent applications), to ask for the blocking of the access to illegal websites. In reality, numerous questions remain, as for the opportunity of this opening but above all as for its compatibility with Community Law. The Court of Justice has specified that a system based on licences may comply with Community Law, but on the condition that it must not be discriminatory, suitable to guarantee the objectives alleged whilst being proportionate to them, consistent regarding any expansion of the market as chosen by the State. Some fear that Pandora’s box is being opened and that the introduction of competition will see the online gambling market run away from what was envisaged by the creators and initiators of the regulatory reform. Thus, can this hypothesis justify the lack of application of the principle of mutual recognition and the limitation of licences? The much-awaited ruling dealing with the Zeturf case will certainly enlighten us on the scope of the consistency principle and thus about the compatibility of some activities with the pursuit of an expansionist policy as is now the case with the French legislation on gambling and online sports betting. 47

47 Request for a preliminary ruling by the Conseil d’Etat, in C-212/08 of 21 May 2008, Société Zeturf Limted v. Premier minstre et al. 235

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Otherwise, the Constitutional Court validated the law in its Decision No. 2010-605 DC of 12 May 2010 and dismissed all the grievances of the French deputies. The deputies felt that it goes against the principles of the 1936 Act on the prohibition of games in France. They also felt that the text does not provide enough scope to fight against addiction and denounced its final form which goes in favour of freedom to supply: ‘It is highly likely that this legislation will lead to a strong development of legal offers aggravating the vulnerability of natural gamblers, miners and banned.’ However, the Constitutional Court decided that ‘there is not, for gambling and games of chance, a fundamental principle recognized in the laws of the Republic that would prohibit this law.’ Concurrently it validates the provision that allows ARJEL to go to courts to block unauthorized websites. There are already opinions which consider that this would undermine the freedom of expression. But what the Constitutional Court has done here is repeat the position it had adopted on the web laws of 10 June 2009 that only judges can order filtering measures. This question will perhaps be the object of the new procedure created by constitutional amendment of July 23 2008, namely: la Question Prioritaire de Constitutionnalité (QPC) which allows a civil or administrative judge to put a question to the Constitutional Court if it considers that a law enacted is inconsistent with the constitution. It is possible that the real debate is just beginning.

236

French Contract Law and Protection of the I nternet G ambler in the N ew French Legislation Aurélie Jouette Melchior

1. Introduction The French population enjoys gambling. According to a poll,1 they spent almost €60 million per day on a combination of La Française des Jeux’s2 games (hereafter FDJ), on Pari Mutuel Urbain’s3 betting (hereafter PMU) or in the slot machines of casinos. This result is even more amazing because it does not take into account neither the money spent on the illegal gambling on offer via the Internet nor the money paid back to winners in casinos which is then replayed.4 The record year of 2009 places FDJ in second place on the podium of worldwide lotteries.5 With a turnover of €9,997 billion, the monopolistic company is preparing for the opening of the French online gambling market. Multiple projects seem to be in discussion like a partnership with the French group Barrière6 about the flagship game of the Internet gambling market, that is to say online poker.

1 Agence France Presse (AFP), press release, 10 January 2010. 2 French public company hold by the State (up to 72%). To this day and since 1933, it is the sole operator authorized to propose lotteries, instant lotteries and sport betting on the Internet. 3 French Economic Interest Grouping (GIE), since 1930 it is the sole operator authorized to propose horse betting on the Internet. 4 The ‘produit brut des jeux’ or PBJ, which is the basement for the taxes on gross proceeds from casino gambling due to the State and cities, is the difference between the stakes of the casino gamblers and their winnings. 5 AFP, press release, 8 January 2010. 6 French group, operating on the casino market. Littler et al. (eds.), In the Shadow of Luxembourg, 237–249 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

Indeed online poker7 as well as sport betting8 and horserace betting,9 is targeted by the Law dealing with the opening to competition and regulation of the online gambling sector. The bill was adopted 6 April by the Assemblée nationale and the Law was published the 13 May10 after that the Conseil constitutionnel stated it was not unconstitutional. 11 At this present time, decrees are published in order for the operators to obtain their licences before the Football World Cup in June 2010.

2. The Legal Definition of Online Gambling in French Law It is necessary to define gambling because it forms the substance of this comment and because this term is given different definitions across different jurisdictions. However, a single legal definition of gambling does not exist in French law. Numerous pieces of legislative text and court decisions must be referred to in order to define this notion. It can be said that games, whereby the winner is determined solely or mainly by chance and where the player places a pecuniary stake, independently of whether played via the Internet or not, are banned.12 For the first time in French law, a legal definition of the games in question is given. First, the Article 2 defines a game of chance as a ‘paying game where chance predominates skill and the combining of intelligence to win’.13 Article 4 of the proposed legislation indicates ‘horse betting and sport betting are betting involving a stake in monetary value where the potential winnings of the gamblers depend on the exactness of their prognostics on the result of every horse event or sporting event legally organized in France or abroad’. Whilst Article 10 adds, ‘online gaming and betting are game or betting for which the incurring is exclusively taking through a public communication service’. The preamble of the bill is helpful in understanding the exact meaning of this article as it exclusively targets the Internet network whatever the means used

7 Law no. 2010-476 of 12 May 2010 dealing with the opening to competition and regulation of the online gambling sector (Loi relative à l’ouverture à la concurrence et à la régulation du secteur des jeux d’argent et de hasard en ligne), published 13 May 2010, Article 14. This Bill was first proposed on 25 March 2009 (No. 1549). 8 Ibid., Article 12. 9 Ibid., Article 11. 10 Supra note 7. 11 Décision no. 2010-605 DC, 12 May 2010. 12 According to the criminal chamber of the Cour de cassation, cf. infra note 16. 13 This new definition directly refers to the case law of the French Cour de cassation criminal chamber. See, infra note 17. 238



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to connect, that is to say computer, cell phone, and the DSL based phone and television services.14 Then, the Article 14 defines the games played in clubs as those ‘constituting spreading games based on chance and on skill, in which the gambler, subsequently to the intervention of chance, decides, by taking into account the other gamblers’ conduct, of a strategy likely to modify his expectation of winning’. This article clearly targets online poker and implicitly excludes slot machines and therefore poker on slot machines. The contribution of these articles to French law is valuable. Indeed, to determine if games on the Internet are lawful or not reference must be made to scattered legislative provisions (essentially criminal law) and to case law. It is clear that a free game, i.e. a game with no pecuniary stake for the gambler, is lawful even if it is a game based on chance.15 As a starting point to the proposed regulatory framework for online gambling, games which do not involve chance are permitted since they do not constitute gambling whilst those which are of pure chance are banned. The issue arises for those games falling in between, as the criminal chamber of the Cour de cassation specified in a important case that games of chance are ‘those where chance predominates skill, ruse, boldness and the combining of intelligence’.16 The borderline between lawful and unlawful forms of gambling cannot be drawn sharply. When chance is predominant the game is banned except if offered by one of the two monopoly operators, the FDJ or the PMU. The nature of the definition given by the supreme Court explains why some parties attempt to prove that poker is pre-eminently a game of skill so as to justify their offer of poker on the Internet.17 Thus, the definition of gambling at least clarifies the scope of the French law dealing with games of chance. French law is restrictive as one of its purposes is to protect the health of gamblers and therefore social order. The law relating to the opening to competition and regulation of the online gambling sector states in its first article that the ‘state policy concerning gambling aims to limit and contain the offer and consumption of the games and to control their exploitation so as to: 1° prevent addiction and protect the minors’.18 To reach this objective,

14 Preamble of the bill no. 1549, p. 8. 15 The application of civil and criminal law both needs a pecuniary stake, besides consumer code, art. L121-36 clearly states about commercial lotteries that the game to be lawful have to be free for the player. This statement is strictly understood as the communication costs have to be reimbursed to the player. 16 Cass. Crim. 5 January 1877, DP 1878, I, p. 191. 17 According to the French case law of the Cour de cassation, poker is a game where chance is pre-eminent, Cass. Crim. 28 May 1930, DH 1930, p. 397; Gaz. Pal. 1930, 2, p. 65. 18 Supra note 7, Article 3, I, 1°. 239

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gambling is placed under State control. As a result we need to focus on the legal construct of the gambling relationship, that is to say the gambling contract. Indeed, the connection that links the operator to a gambler is a contract. This was never in doubt, but it is now clearly stated in the Law. 19 The aim of this contribution will be to study this contractual link and to examine if French contract law and above all consumer law is able to protect adequately the player and thus fulfilling the objectives of French law.20 We will also try to determine the potential contribution which the new French legislation (as proposed) will make to existing consumer and contract law. To answer to these questions we will first examine the conclusion of the gambling contract (1.) and then its enforcement (2.).

3. The Conclusion of the Gambling Contract 3.1. The Legal Definition of the Gambling Contract 3.1.1. The Principles According to Articles 1104 and 1964 of the French civil code a gambling contract is considered as an aleatory contract.21 Article 1104 states that ‘where the equivalent consists in a chance of gain or of loss for each party, depending upon an uncertain event, a contract is aleatory’, and whilst 1964 defines an aleatory contract as ‘a reciprocal agreement whose effects, as to advantages and to losses, either for all the parties, or for one or several of them, depend upon an uncertain event’. In spite of the terms employed by the second of these articles, the contract is said to be aleatory when there is a ‘correlate existence of a chance of winning and a risk of loss’.22 As the contract is reciprocal, it may be declared void if the risk does not exist for one of the parties or judge may modify the qualification

19 Supra note 7, Article 10, 2°. 20 As required by the ECJ, the measures of a national law must be ‘suitable, that there exists the requisite causal connection between the measure and the aim pursued’, Littler, A., ‘Has the ECJ’s jurisprudence in the field of gambling become more restrictive when applying the proportionality principle ?’, in Fijnaut, C. and Littler, A. (eds.), The regulation of gambling: European and national perspectives, (Leiden: Martinus Nijhoff Publishers, 2007), p. 23. 21 French Civil Code, Article 1964. 22 Bénabent, A., ‘Les Contrats aléatoires – Jeu et pari’, J.-Cl. Civil, fasc. unique art. 1965 à 1967, February 2007, para. 3; Mouralis, J.-L., La notion d’aléa et les actes juridiques aléatoires, Ph.D. thesis (Grenoble, 1968), para. 100 and Rép. Civ. Dalloz, V° Jeu-Pari, para. 1; Terré, F., Simmler, P., Lequette, Y., Les obligations (10th edn, Paris: Dalloz, 2009), para. 343. 240



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of the contract.23 It therefore means that the occurrence of the risk must not be controlled by one of the parties. In this regard they have to be on an equal footing.24 A contract for gambling services can also be defined as a unilaterally drafted contract or ‘contrat d’adhésion’, that is to say a standard form contract. This has always been the case25 given that the games are proposed by a single operator to a mass of gamblers, but it is now written into Article 10, 2° of the Law that the rules constitute ‘a standard form contract to the game submitted to the approval of gamblers’ and the gambler is defined as the person who ‘accepts a standard form contract to a game proposed by an operator (…)’.26 This kind of contract is very common and generally, but not exclusively, links a consumer to a professional. This type of contract offers little protection for the weakest party as its content ‘is not the result of the free discussion of two parties on an equal footing; (the contract) has been written in advance and on the terms of one of the parties who, in a stronger position economically and socially, puts it forward to multiple co-contractors to consent to’.27 The contractual relationship is thus unequal, that is why the weakest party to the contract needs to be protected. In this domain, and when a consumer is involved, the protective rules of consumer law can be applied to the contract in order to balance the parties’ interests. However, the submission of an aleatory contract to consumer law raises controversies in French law although there can be no doubt that the Internet gambler can be qualified as a consumer. 3.1.2. Issues Raised by the Legal Definition In French law, a consumer may be stricto sensu defined as ‘a physical person who buys or uses a good or a service for non-professional use’.28 The Internet gambler fits to this definition as on the one hand, games of chance are considered to be services following the Schindler case and,29 on the other hand, leaving 23 Bénabent, A., J.-Cl. Civil, art. 1964, décembre 2007, para. 57; Terré, F., Simmler, P., Lequette, Y., supra note 22. para. 343. 24 Morin, A., Contribution à l’étude des contrats aléatoires, Ph.D. (Paris: L.G.D.J., 1998, pref. Ghozi A., para. 470s. 25 Concerning the French lottery, see Cass. Civ. 1ère 18 January 1982, jcp 1984, II, 20215, note F. Chabas, D.1982.457, note C. Larroumet, RTD Civ., 1983, p. 143, obs. G. Durry. 26 Supra note 7, Article 10, 2°. 27 Terré, F., Simmler, P., Lequette, Y., supra note 22, para. 196, p. 207. 28 Calais-Auloy, J., Steinmetz, F., Droit de la consommation (7th edn, Paris: Dalloz, 2006), para. 7. 29 Case C-275/92, Her Majesty’s Customs and Excise v. Gerhart Schindler and Jörg Schindler [1994] ECR I-1039, para. 37. 241

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professional gamblers aside, the majority of Internet gamblers are physical persons playing in a non-professional capacity. Nevertheless consumer law cannot protect the gambler as the contract is said to be aleatory. Indeed, in the French law of contracts, when a contract is classified as aleatory some authors,30 founding their reasoning on case law, argue that consumer law cannot apply. The aleatory nature of the contract means that the balance of power between contracting parties to a particular contract is unknown thereby disqualifying the application of provisions which aim to correct this balance within the contract, and this includes measures of consumer law.31 It can be observed that there is a contradiction between the legal definition given of the gambling contract and the qualification of the gambler as a consumer. Nevertheless, two remarks may be done about this statement: – First, we must notice that the characteristic of being aleatory does not always exclude the application of consumer law to the contract. According to one author,32 this will only be the case when ‘the consumer’s protection leads to question the uncertainty of the economy of the contract’ that is to say that the consumer law does not apply when ‘its application goes against the essence of aleatory contracts’.33 However it seems unlikely that this is the case concerning gambling contracts since the application of consumer law mainly concerns the respect of two obligations: the reinforcement of the general duty of information for the operator and respecting provisions concerning unfair terms. These provisions do not question the existence of the risk in the gambling contract.

– Second, the contract links a single operator to a mass of gamblers. Like insurance companies, these operators technically manage the risk but do not bear the burden of it due to mathematics (due to mathematical expectations and the law of large numbers). 34 Exposure to risk is not reciprocal and indeed it is doubtful whether there is any real risk for the operator because of the extent to which it is suppressed. Yet such a condition of reciprocity is necessary for a contract to be qualified as aleatory.35 It is true to say that the gambling contract is juridically

30 Bénabent, A., Droit civil, Les obligations (11th edn, Paris: Montchrestien, 2007), para. 20; Malaurie, P., Aynès, L., Cours de droit civil, t. VI ‘Les obligations’, (10th edn, Paris: Cujas, 1999/2000), para. 319, p. 193. 31 Ibid. 32 Morin, A. supra note 24, para. 534. 33 Ibid. 34 Kahn, R., La notion de l’aléa dans les contrats, Ph.D. thesis (Paris, 1924), para. 25; Mouralis, J.-L., supra note 22, para. 100; Morin, A., supra note 24, para. 471. 35 See supra note 21. 242



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aleatory when reasoning about the relationship between one gambler and one operator, but it cannot be denied that, collectively, the risk does not exist for the operator. In light of these remarks it may be held that contracts for gambling services fall within the scope of consumer law, so as to protect the gambler. To further the line of argument that gambling contracts should be covered by consumer law we may refer to the third article of the new Law previously quoted which refers to ‘consumption’.36 Reference can also be made to Article L121-16 following of the Consumer code. These articles apply to the conclusion of contracts using means of distance communication and impose several obligations upon the professional. One of these articles provides a right of withdrawal for the consumer. Logically this does not apply for contracts immediately executed with the agreement of the consumer as it is clearly stated by Article L12120-2. Furthermore, the article specifies that the right of withdrawal does not exist for ‘authorised betting contracts or lotteries’, ‘unless otherwise agreed by the parties’, and therefore this text could apply if the parties decide that it should.37 As a result, the fact the gambling contract is aleatory does not exclude the application of consumer law. We can thus conclude that the provisions dealing with contracts concluded using distance communication services can apply to betting contracts or authorised lotteries but only if the parties decide that it should. 3.2. Operators’ Obligations at the Time of Contract Formation As a professional contracting with a consumer, operators must respect some obligations. The main obligation is to inform the gambler about the services proposed. The second one concerns the drafting of the contract. The operator must not insert unfair terms in the rules of the games. 3.2.1. Information Provided to the Gambler Principles of French civil law and consumer law provide that the co-contracting party must be well informed before consenting to the contract. Case law has created a general duty for the professional party to inform and advise the other party acting in a non-professional capacity. The grounds for this obligation can be found in the general principles of French civil law such as in the Article 1134 al. 3 of French civil code imposing to the duty to contract in good faith.

36 See supra note 18. 37 It eventually may be the case when opening a gambling account. 243

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When selling goods or services to a consumer, the duty of the professional contracting party is intensified, as it becomes a legal obligation coming from consumer law (Articles L 111-1 to L 113-3 of the French Consumer Code). This general duty to provide information aims at protecting the weakest party to the contract. Indeed, because the contract is unilaterally drafted, consumers should be well informed when consenting to standard form contracts. When applied to gambling contracts, this means that the gambler has to be informed of the characteristics of the game he wants to play. For example, the rules of the game must be clearly stated, the risks for the consumer’s health i.e. the risk of addiction, and it could be argued that the return rate should be clearly given to the gambler, i.e. his chance to win or loose which is not always the case today. Furthermore operators are required to provide such information in French.38 Besides, a special duty of information is provided by the Consumer code, namely Article L121-18. This provision establishes a list of compulsory terms,39 and it also specifies that the information ‘shall be communicated to the consumer clearly and comprehensibly’. The new legislation, introduces a few new requirements regarding the information that the gambler must be provided with when contracting with an operator. Firstly in a chapter dealing with the fight against gambling addiction, the Law states that the operator has to ‘prevent behaviours of excessive or pathological gaming by providing mechanisms of auto-exclusion, of moderation and of auto-limitation of deposits and bets’.40 Then the law also states that the operator ‘communicates permanently to each and every player frequenting his website, the current balance of his gambling account’. This obligation does not occur before contracting, as is the case for the general duty of information, but during the execution of the contract, i.e. during the game. The gambler must be well informed. This general duty of the operator arises before the contract is finalised, and as such can be considered as a pre-contractual obligation which seeks to protect consumers by ensuring that they are fully informed before consenting to a contract. As the contract is unilaterally drafted, when consenting to the contract the gambler is assumed to have consented to each and every clause of it. Yet it may reasonably doubted that the gambler will read some of the rules, let alone all of the rules in their entirety. As a result, and to reinforce the protection offered after consent has been given, some terms may be challenged as being unfair.

38 Law no. 94-665, 4 August 1994, Article 2, ‘In the designation, the offer, the presentation, the instructions of use, the description of the guaranty’s extent and conditions of a good, a service and for invoices and receipts, the use of French language is compulsory.’ 39 See Consumer Code, Article L121-18. 40 Supra note 7, Article 26. 244



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3.2.2. Unfair Terms The French consumer Code provides that ‘in contracts concluded between a business and a non-business or consumers, clauses which aim to create or result in the creation, to the detriment of the non-professional or the consumer, of a significant imbalance between the rights and obligations of the parties to the contract, are unfair’.41 The same article then specifies the definition of an unfair term: ‘the unfair nature of a term is assessed by referring, when the contract is concluded, to all the circumstances surrounding its conclusion, as well as to all the other contractual clauses. It is also evaluated in respect of those contained in another contract where the conclusion or performance of these two contracts are legally dependent upon one another’.42 A decree establishes a list of terms that are presumed to be unfair. Some clauses are rebuttable and the professional can try to prove that the term is not unfair whilst for other terms the presumption is irrefutable. This is the case for clauses the object or effect of which is ‘to suppress or reduce the right to reparation for the harm suffered by the non-professional or the consumer when the professional is in breach of the contract’.43 This provision targets the terms which seek to exclude the responsibility of the professional. Concerning gambling contracts, the rules of the games often contain unfair terms. For example, a term of the national lottery was targeted by the annual report (year 1988) of the Commission des clauses abusives.44 In practice operators may attempt to uphold rules to the effect that they cannot be held responsible for the cancelling of a game when there is a technical failure (except when the force majeure is proved) or even when the operator decides to withdraw the game, or that the exoneration of any loss upon cancellation is limited in its amount or totally excluded. Such rules are prohibited. The legislation provides that the operator will have to respect precise specifications established by a decree,45 the respect of which will be controlled by the Regulation authority for online gambling ( ‘ARJEL’).46 If a rule does not fulfil these terms of reference the requisite licence will not be given to the operator.47 Outside of the courts, this new authority will be the sole body guaranteeing the protection of gamblers in terms of the nature of gambling contracts.

41 French Consumer Code, Article L132-1. 42 Ibid. 43 French Consumer Code, Article R132-1, 6°. 44 Commission des clauses abusives, annual report, year 1988, BOCCRF, 03/02/1990. 45 Supra note 7, Articles 20 and 21. 46 This new authority is created, supra note 7, see Article 34 and following. 47 Supra note 7, Article 25, II. 245

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4. Enforcement of the Contract Exposure will firstly be given to certain provisions of the French civil Code, in order to establish that gambling contracts concluded with operators are binding. Having established this it is necessary to specify the gamblers’ rights toward the operators should the latter not fulfil their obligations. 4.1. The French Civil Code Indeed, the French civil Code provides for a specific and original treatment of the gambling contract. According to its provisions gambling contracts have no binding force. Article 1965 provides that ‘legislation does not grant any action for a gaming debt or for the payment of a bet’, and Article 1967 states that ‘in no case may the loser recover what he has voluntarily paid, unless there was, on the part of the winner, deception, fraud or swindling’. Thus, an action seeking the enforcement of a gambling contract is impossible, for both the unpaid winner and for the unlucky loser. These provisions do not apply when the law allows the game, that is to say when authorized operators offer the game. Consequently an administrative authorisation transforms the gambling debt into one which is fully enforceable in civil law.48 First, the PMU was concerned with numerous cases,49 the first one arising in 1935.50 Then it was held by the second chamber of the Cour de cassation in a case Baillot c/ URSSAF et autres,51 in 1958, that the legality of the national lottery entails that all of the operations executed by the national lottery operator in the performance of its task are valid in law. Finally, it was held that civil law could not ignore the games in casinos ‘authorized by the law and ruled by the public authorities’.52 In conclusion, the Civil Code (Article 1965 and following) does not apply to gaming and betting contracts when the game is authorized by the law. In this case, the gambling debt is enforceable as a civil debt. This principle will surely be applied to the games proposed by the new operators, duly licensed by ARJEL. As the contract is fully enforceable the gamblers can thus go to court and defend their rights vis-à-vis the operators.

48 See, Darracq, J.-B., L’Etat et le Jeu; Etude de droit français, Ph.D. thesis, (Aix Marseille: PUAM, 2008), p. 178s. 49 Bénabent, A., supra note 22, para. 72s. 50 Cass. Req. 21 janv. 1935, Gaz. Pal. 1935, I, 484. 51 Cass. 2ème civ. 21 juillet 1958, Baillot c/ URSSAF et autres, Bull. civ. II, no. 572. 52 Cass. Ch. Mixte 14 mars 1980, Gaz. Pal. 1980, I, 290, concl. Robin. 246



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4.2. Rights of Gamblers Towards the Operators As has already been said,53 the Law creates a new administrative authority. The ARJEL will have to control and even sanction those operators which do not respect the terms of the delivered licence. Indirectly the ARJEL will be the sole body guaranteeing the protection of gamblers by controlling the operators. Nevertheless, gamblers will still be able to initiate proceedings before the courts. 4.2.1. The Role of ARJEL The new authority will only have to deal with the regulation of online gambling. It will ‘permanently control the activity of the licensed operators (…) in order to ensure the objectives defined in article 1 are respected’,54 it will also control whether the operators respect their obligations towards the gamblers or not. To achieve these purposes an enforcement committee within ARJEL has been proposed.55 This body will investigate and ultimately determine whether or not an operator has breached the conditions by which they have to abide, and should it be found that a condition has been breached a procedure has been proposed which, when enacted, will see the termination of the offending actions. Article 43 provides this procedure, which can be summarised as; The agency first delivers a notice to the operator to conform to the legislation within 1 or 6 months, renewable once except for serious and repeated breaches. Then, a new certification has to be passed by the operator according to the provisions of Article 23. If the latter fails to be certified again, a motivated and notified sanction can be inflicted (Article 43. II). The sanctions have to be proportionate, but the range of sanctions available is very large from a simple warning to the suspension of the agreement formerly granted by the ARJEL.56 The operator can appeal against this decision in front of an administrative judge (Article 44, II). ARJEL will thus control if the operators respect their obligations and especially their obligations toward the gamblers concerning addiction for example, as it is an objective of the law. However, the protection of the gambler by this body is indirect, as the gamblers cannot refer to the agency in case of breach. In the first text,57 it was stated, Article 32, that the ARJEL can be referred to by the players for conciliation in order to rule the issues arising with an operator. Then, an amendment pleading for the suppression of this article was voted. The reason evoked was that the

53 Supra note 46. 54 Supra note 7, Article 38. 55 Ibid., Article 41. 56 Article 23. 57 Bill no. 2373. 247

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authority will have too much to deal with and that adding this function of conciliator was not the good thing to do in order not to overburden the agency.58 As a result when a gambler has a complaint concerning his personal and private data, this can be made directly to the operator as the Article 19 of the law states that the operator has to provide for a free complaints procedure. Nevertheless and in other areas, the gambler can submit his claim to the judicial system, as he cannot be deprived of his right to go to courts. 4.2.2. The Right to Judicial Claim Based on the Contract The judicial claim will be based on the contract; therefore the sanctions that could be asked by the gamblers are to be found in civil and consumer law. However, even if consumer law contains protective provisions, it does not always provide for adequate sanctions. Reference must then be made to the Civil Code in order to find these sanctions. Concerning the lack of information given by the operator, several articles may found application. If these obligations are not respected, the gambler can introduce an action for voidance of the contract and ask for compensatory damages. As the duty to inform may be considered as a pre-contractual obligation, the action is grounded on the Article 1116 of the Civil code dealing with deception.59 As for compensatory damages, the action is grounded on article 1382 dealing with torts.60 Concerning the information that must be communicated once the contract is concluded, the resolution of the contract may be requested (Article 1184, civil Code) and/or compensatory damages (Article 1147, Civil Code). Concerning unfair terms, the sanction may be found in the Consumer Code. The offending term is deemed to be null and void (L132-1 Consumer code) if the contract can continue to exist without the said term. The contract remains valid and only the term is disapplied. These sanctions seem to be dissuasive but their application is in fact limited. First of all, the cost of the legal action is disproportionate to the amount which the consumer can eventually recover. Indeed, an action is costly and takes time. The consumer is generally reluctant to apply to the courts for such reasons. Then, the content of the general duty to inform the consumer is quite unclear especially concerning gambling. 58 Lamour J.-F., Rapport no. 1860 sur le projet de loi relatif à l’ouverture à la concurrence et à la régulation du secteur des jeux d’argent et de hasard en ligne, 22 July 2009, p. 224. 59 French Civil Code, article 1116: ‘Deception is a ground for annulment of a contract where the schemes used by one of the parties are such that it is obvious that, without them, the other party would not have entered into the contract’. 60 French Civil Code, article 1382: ‘Any act whatever of man, which causes damage to another, obliges the one by whose fault it occurred, to compensate it’. 248



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However, these sanctions are not applied because the consumers do not attempt to enforce their rights; they generally do not commence judicial action, as previously stated. Consumers associations may apply to the courts but the concept of class actions is unfamiliar to French law; the result of the action intended by consumer associations do not apply to each consumer individually. For example, concerning unfair terms, an author argues the individual action is limited by the fact the judges ‘are forbidden to decide cases submitted to them by way of general and regulatory provisions’.61 According to this rule, the judgment only applies to the claimant. If a term is declared unfair by a judgment in a case involving an operator and a gambler, the said judgment only applies to the targeted contract and not to the other contracts of the said operator. With a class action, the decision would have had a collective effect on every member of the group who intended the action. Every contract would have been modified.

5. Conclusions Protective provisions do exist in consumer law but are not applied in practice. The sanctions may be dissuasive but their role is limited. The new legislation tries to complete its objectives mainly by regulation. Few mandatory provisions exist concerning the gambler’s protection and where they do exist the meanings for the gambler to bring action has not been studied. Sanctions do exist but one may think the ARJEL will have too much to deal with, as it has to regulate, control that the operator respects each and every objectives of the French law and sometimes investigate and impose penalties. One can say that it will be hard to control the whole legal Internet gambling market, which is sprawling. Gamblers do not appear to enjoy greater individual protection than consumers in general even if gambling is not a service like the others. For consumers of gambling services numerous protective rules exist but their enforcement is not suitable or even possible because consumers are not inclined to go to court. As a result the system is insufficient to protect the gambler and thus fight addiction, which is one of the main objectives of French law. A reinforcement of consumer and contract law would have been welcomed, as it is the only ground for gamblers to bring legal proceedings. The consumer of gambling services is even more powerless because the possibility for a class action does not exist in French law even if the opportunity of adopting this type of action is currently under examination.62 61 For a full demonstration, cf. Julien, J., Droit de la consommation et du surendettement (Paris: Montchrestien, 2009), para. 207. 62 Astaix, A., Action de groupe: la question à l’étude au Sénat, Dalloz actualité, 27 October 2009; see also the proposal of some senators ‘Proposition de loi sur le recours collectif ’, no. 277, 9 February 2010. 249

Gambling Regulation in Europe: Moving beyond Ambiguity and Hypocrisy Alain-Laurent Verbeke

Gambling regulation in Europe is not an exclusive EU competence. The basic assumption that gambling regulation belongs to the primary responsibility of the member states was questioned in the early nineties and yet confirmed. The European Council decided in December 1992, in Edinburgh, that no harmonization of gambling regulation should be pursued.1 This decision was based on the principle of subsidiarity. Twenty years later, this point of view remains in line with the majority opinion in both the member states and the European Institutions (Council, Parliament and ECJ), as witness the contributions in this book.

1. The Member States The Leuven Conference in November 2009 and this book therefore devote quite some attention and pages to the analysis and critical assessment of recent developments in five member states: Belgium, UK, France, Germany and the Netherlands. Only in the latter no recent legislative change has been enacted yet. In Belgium, the Gambling Act of 1999 was substantially amended in 2009. The President of the Gaming Commission, Mr. Marique and its General Director Mr. Callu have played an influential role in this reform, adapting the law to developments such as the internet. This has led to the modified Gambling Act, entering into force in its entirety by January 2011. Nele Hoekx neatly assesses the new law. Overall the result is rather positive, although some critical suggestions are made.

1 Littler, A., Een Europese kijk op de voorgestelde wijziging van de Kansspelwet, – Un point de vue européen sur la proposition d’amendement de la loi sur les jeux de hasard, in Hoekx, N. and Verbeke, A.L. (eds.), Kansspelen in België. Les jeux de hasard en Belgique (Brussels: Larcier, 2009), p. 3, p. 21. Littler et al. (eds.), In the Shadow of Luxembourg, 251–259 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

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Several other member states equally have come to take more or less substantial initiatives to adapt their gambling laws to the modern era.2 In some cases this also has led to a more uniform and coherent gambling regulation. A good example, besides Belgium, is the UK with its Gambling Act 2005. David Miers thoroughly discusses this important and innovative piece of legislation. It reflects a new vision moving from a restrictive stand to a more liberal approach towards gambling as leisure good.3 The regulation is consistent and simplified. Focus is on expanding free choice for players and transparency and responsibility for business. Including both off and online gambling, the UK legislation seems equipped to meet the needs of a modern society. The French landscape of gambling regulation remains, despite a brand new Act of 12 May 2010,4 very scattered and diverse. The new law is limited to the regulation of online poker and betting. Fabienne Péraldi-Leneuf not only comments on the process of the making of this legislation. She also explains beautifully how the Act is embedded in the French desire (some might say ‘fear’) to comply with the requirements of European law as laid down in the case law of the ECJ. In a second contribution on French law, Aurélie Jouette Melchior focuses on the protection of the internet gambler in the new legislation, in particular from the perspective of consumer and contract law. Tilman Becker gives an insight in the complicated situation of gambling regulation in Germany. Regarding online gambling, there is a complete prohibition. This is however not based on scientific data but on ‘helplessness’. The developments in other member states with internet licence systems, should inspire the German legislator, so hopes the author. As to the complex diversity of rules, a serious, be it still imperfect, effort of leveling the playing field to some degree of uniformity has been made through the Interstate Treaty on Gambling 2008. It aims at creating a comprehensive and unified framework for lotteries, casino games and betting. Cyrille Fijnaut sketches the situation in the Netherlands as one that is certainly on the move, but has not yet arrived at its final destination. Although a reform proposal has been drafted, it has not been presented as a reform bill to Parliament. With the demission of the Balkenende cabinet, and at this moment (end of July 2010) no new government in place yet, it seems highly unlikely that a new bill would be voted in the course of 2010. But this may not be so bad after all, as Fijnaut explains how the Dutch legislature should grasp the opportunity

2 Some are not discussed in this book, e.g. Denmark and Italy. 3 Hoekx, N., De deelnemer aan kansspelen op het internet. Een rechtsvergelijkende analyse van regels en belangen, Doctoral Thesis, University of Leuven, July 2010, no. 46. 4 Loi no. 2010-476 of 12 May 2010 relative à l’ouverture à la concurrence et à la régulation du secteur des jeux d’argent et de hazard en ligne, published JORF 13 May 2010, p. 8881. 252



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to regulating gambling in a consistent manner, compatible and in line with European developments and aiming at solving both the problems of addiction as well as fraud, illegality and organized crime involved with the gambling business. The latter no doubt requires multinational cooperation, he adds.

2. The European Framework Although the member states may enjoy their freedom to regulate gambling as they see fit; it is unquestionable that this must be embedded in and done with respect for the larger framework of Europe. This does impose some restrictions on the member states’ autonomy. The most important follow from the supremacy of the European internal market freedoms (see infra). Although there is no EU secondary legislation explicitly regulating or coordinating gambling rules, some Directives may play a role, although limited.5 While the gambling sector is explicitly excluded from the scope of application of the Directive on Electronic Commerce, the Services Directive and the Audiovisual Media Services Directive, some impact may follow from other Directives such as the Notification Directive, the Third Money Laundering Directive and the VAT Package.6 Far more important indeed is the primary EU legislation and its interpretation through the case law of the ECJ. We have seen an abundant series of cases on gambling regulation, with many more to come. The member states must execute their margin of discretion on gambling regulation with respect for the supremacy of some fundamental European principles, such as the freedom of establishment (article 49 TFEU) and the freedom to supply services (article 56 TFEU). Infringing on these freedoms is allowed only to the extent that such regulation is designed to uphold legitimate goals related to public policy, public security and public health. Quite clearly, such regulation must be proportionate in relation to the objectives presented. The ECJ therefore uses a three-element test.7 Firstly, it examines whether the restrictive measure is suitable to achieve the formulated objective: is the measure genuinely directed to realizing the goals invoked to justifying it? Furthermore the Court tests whether the restrictive measure is necessary to achieve the pronounced goal: is there no less restrictive measure available to reach the desired result? Finally, the restrictive measure must be proportionate strictu senso: it should not be out of proportion to the intended objective or result achieved. The ECJ case law applying these principles to the gambling sector is discussed at length in this book, in particular in the contributions of Alan Littler, Justin 5 Littler, supra note 1, p. 12–16, p. 31–35. 6 P. Vlaemminck in this book, p. 113. 7 A. Littler in this book, p. 20. 253

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Franssen and Frank Tolboom,and Philippe Vlaemminck. There appears to be a double evolution in the case law. The first evolution goes from a rather large leeway for the member states’ margin of discretion in Schindler, Läärä, Anomar, over Zenatti where the Luxembourg Court requires the national court to determine whether the restrictive measure effectively meets the objective presented as a justification, to a stricter assessment in Gambelli and Placanica.8 Here the ECJ explains that restrictive measures in national gambling laws are only suited to the objectives presented if these measures are pursued in a consistent and systematic manner. This has been named the ‘hypocrisy’ test.9 Furthermore, the Court has stated in Gambelli that the national court must take into account circumstances where a gambling service supplier is already subject to regulation in the member state of its establishment. Although this is not an acknowledgment of the principle of mutual recognition, it however follows from that reasoning that the licensing in another member state should play a role in the assessment of the proportionality test. With the second evolution the pendulum is back to Schindler, reverting to a lighter proportionality test and again allowing more leeway to the member states’ restrictive power. This has been decided in the famous Santa Casa decision. Etienne Marique welcomes the judgment as it stands in line with good sense. Quite to the contrary, Alan Littler10 and Justin Franssen are critical of Santa Casa. Franssen argues that the Court is too readily accepting the theoretical justification offered by Portugal. The hypocrisy test seems far away. The burden of proof for Portugal indeed is rather low. The conflict of interest in the chef of Santa Casa, acting both as monopolistic operator and regulator, is ignored. As to the necessity of the restrictive measure, the monopoly, the ECJ leaves the assessment to the national court. Nor does the court examine the availability of less restrictive alternatives. One can indeed seriously question whether a monopoly is really functionally needed to achieve the presented goals of preventing fraud and crime. Both Philippe Vlaemminck and Justin Franssen discuss in some detail another important consequence of Santa Casa: the rejection of the principle of mutual recognition. In that regard, the decision indeed is a true victory for the member states’ regulatory power in the gambling area. A licence in one member state does not imply an approval to functioning in another member state. This surely does not demonstrate any confidence in member states issuing gambling licences. It may well be the end of gambling hubs in places like Malta or Gibraltar. This reasoning is explicitly confirmed in opinions rendered in the first half of 2010 by AG Bot and AG Mengozzi in several new ECJ cases, as analyzed in great detail 8 J. Franssen in this book, p. 90. 9 J. Franssen in this book, p. 92. 10 Littler, supra note 1, p. 7–10, p. 26–29. 254



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by Alan Littler and also dealt with briefly in the paper of Justin Franssen and Frank Tolboom.

3. Beyond Ambiguity However lenient the ECJ may have become, new legislation will continue to be scrutinized and challenged in the courts. It is a thin line to balance, and a situation that offers not much legal certainty. The best proof is the number of cases awaited to be decided by the ECJ (see the lengthy analysis in Littler’s contribution in this book). In her critical assessment of the amended Belgian Gambling Act, Nele Hoekx questions the compatibility with EU law of the requirement for online operators to establish a physical gambling venue on Belgian territory. It is indeed doubtful whether such condition would pass the proportionality test. Such type of questions and doubts may well come up with every new piece of member state regulation. Moreover, all players in the field seem to admit that several aspects of gambling regulation, in an ever internationalizing and virtual world, cannot be dealt with on a merely national level, but should be taken up at a multinational, European, level. Even more than other sectors, the gambling business, both for consumers as for operators, does not know any physical borders anymore. This brings us in a situation of rather complex ambiguity. On the one hand the primacy of member state regulation and autonomy based on cultural, traditional, moral values;11 on the other hand the supremacy of the European freedoms imposing criteria on measures that may restrict the freedom of establishment and services. The precise equilibrium between both will never be clear cut, as the case law of the ECJ demonstrates. Moreover, as explained, most stakeholders believe that the primacy of the member states does not hold for all aspects of gambling regulation. Some elements that are transnational must be lifted up to the European level. What elements, how, according to which criteria, it all remains very vague, yet adding to the ambiguous state of gambling regulation in Europe. Fortunately, several contributors to this book offer some ideas for a clearer and more consistent framework of gambling regulation in Europe. Etienne Marique points out some priorities for the Belgian Presidency of the second half of 2010, such as cooperation between regulators and some minimum harmonization on consumer protection, prohibition of cross border advertizing, online gambling, etc. Ellen Heldahl, speaking for the Swedish Presidency of the second half of 2009 encourages an exchange of ideas between all member states and the European Institutions, and offers several elements of inspiration on measures

11 E. Heldahl in this book, p. 84. 255

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for responsible gambling. Justin Franssen advocates a ‘conditional recognition principle’, based on multilateral cooperation agreements between licensing authorities, referring to the new Danish gambling regulation. Philippe Vlaemminck defends a ‘comprehensive approach to active subsidiarity’ in gambling regulation, the basis being national legislation, but with transnational elements regulated at the European level. This should lead to a flexible EU framework within which the member states may formulate their policy model, in conformity with the Framework and with a notification procedure of sorts. Furthermore, the author recommends a coordinated approach for well defined aspects of gambling policy that must be regulated at EU level as well as coordination of judicial cooperation and enforcement rules related to illegal gambling, match fixing, money laundering, etc. The conclusions of Alan Littler in his doctoral dissertation go in the same direction. Respecting the member states’ margin of discretion, he advocates a Community framework of common understanding, and a mutual recognition of equivalence, not automatically, but through coordination and cooperation.12

4. Beyond Hypocrisy In my view, moving beyond ambiguity, achieving a truly clear, simplified and consistent format for gambling regulation in Europe, will not be possible without moving also beyond the hypocrisy that often determines politics and certainly gambling policies. The hypocrisy is manifold. Firstly, it relates to the traditional invoking of moral, religious, cultural and other values to explain differences in regulation and legislation in the member states and to justify the primary competence of the member states to regulate this sector. In my work over the past years with the Belgian Gaming Commission,13 I have witnessed with the leading officials of this regulating authority a sincere concern to balance the interests of all parties involved, be it the state, the business as well as the players. The Commission’s President Etienne Marique rightly stresses in this book the importance of the ethical values in the new Belgian law and in the approach of the Belgian Gaming Commission. 12 Littler, A., Member States versus the European Union: The Regulation of Gambling (Leiden: Martinus Nijhoff, forthcoming 2010). 13 With Nele Hoekx, coordinating the Research Program on Gambling Law at the Institute for Contract Law of the University of Leuven (www.law.kuleuven.be/researchprogramgamblinglaw/). See e.g. Hoekx, N. and Verbeke, A.L. (eds.), Kansspelen in België. Les jeux de hasard en Belgique (Brussels: Larcier, 2009), 191 p.; Andries, K., Carette, N. and Hoekx, N., Kansspel, in Tilleman, B. & Verbeke, A.L. (eds.), Recht en onderneming. 17, (Bruges: die Keure, 2006), 471 p. 256



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I do believe that most member states share a sincere common interest in protecting pathological players and handling the manifold unfortunate socioeconomical consequences of gambling for addicted players. However I seriously doubt the legislatures’ sincerity regarding so called cultural values. It is true that different national gambling cultures have existed in the past, and may still have some impact as of today. And yet, are they still so important and determining in today’s modern society? Could the passionate adherence to these cultural values be no much more than a window dressing theatrical move to hide the real interests: a mere power play, trying to keep grasp on a big money business, with important tax consequences and funding for sports, charity and research? In any event it is unfortunate that the ECJ has weakened the hypocrisy test. At least it should be required that a member state must offer objective and sound evidence to justify the restrictive measures taken. The member state should not get away, as Portugal did in Santa Casa, with a merely theoretical motivation that is not challenged at all in its reality. Secondly, the hypocrisy appears where public policy and security arguments such as protection against addiction, fraud and crime, are invoked to justify restrictive national measures. How sincere are member states that impose several market restrictions based on these considerations on the one hand, and engage in massive advertising, promotion and expansion of state sponsored gambling activities on the other hand? Protection against addiction: why should protection of pathological players be regulated at a member state level? Are the risks for a Belgian player so different from those for someone in Germany, France or Greece? One could even argue that from the perspective of protecting the player it makes all the more sense to envisage a broader territory: self-exclusion e.g. will be more effective if it works not only in Belgium but also in the UK and Italy. In the margin of this, another facet of the hypocrisy so present in the gambling area should be mentioned. Much gambling legislation is based on the assumption of several patterns of pathology, health risks, etc. that gambling may bring about. All of this is bluntly put on the table, as if it were a fact, while there is hardly any evidence. Sound scientific data both quantitative and qualitative are lacking all too often, especially as to the risks of online gambling. The EU should invest in research providing data that offer insights in the real and concrete risks. In the absence of scientific data, one may rightly question the justification for restrictive measures imposed by member states on such an unsupported basis. I do however not criticize the precautionary principle here, as I can understand that regulation may be based on a scientific and objective evaluation even if the risk is not yet determined by hard and certain facts.14 But I do question the fact that regulation is often based on mere assumptions without any scientific 14 P. Vlaemminck in this book, p. 115. 257

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backing as well as the fact that these risks should be taken care of at a national rather than a EU level. Protection against fraud: why should fraudulent tricks of operators be taken care of at member state level? Are the fraud mechanisms they use so different in Spain and in the Netherlands? Do consumer needs in terms of information and transparency differ from one member state to another? Protection against crime: here it becomes really difficult to understand why regulation should be kept with the member states. Protecting against all kinds of criminality related to or following from the gambling sector and illegal circuits, including even organized crime and the mafia, surely is not possible if restricted to the national borders. Criminality is an international business. In the gambling sector in particular, with online gambling, the world is not only a real world, yet more and more a virtual world. In the world of the web national borders are an illusion, a joke even. So why and how could one seriously argue, especially after Lisbon, that such measures should be taken at a member state level? A minimum of cooperation between member states and regulators, through a central database should be realized on very short term.

5. Conclusion Hence it really is unclear to me why all of these protective measures should be taken at a member state level. The political sensitiveness of the matter obviously is the reason. This however sounds like some acknowledgment of political hypocrisy. Although I am not a die hard of European harmonization15 there are areas where harmonization or regulation at EU level simply makes more sense. I believe the gambling sector clearly is such an area. There are numerous social and economical reasons to establish a Single European Market for gambling services. Whatever debates and exchanges of ideas one may organize between member states, and between member states and the European Institutions, as long as these are based on the assumption of primary member state competence, they will lead us not much further. Gambling regulation will then remain fragmented and inconsistent, national and protective, challenged before the Court in Luxembourg, ambiguous and not very effective. If, as many in this book acknowledge and even advocate, several elements must be harmonized and taken up to the EU level, why then not turn around the basic assumption and recognize that this is a sector that transcends the national boundaries? Why not accept, in the interest of the

15 See e.g. my criticism of harmonizing European contract law or private law: Verbeke, A.L., Negotiating (in the shadow of a) European Private Law, MJ – Maastricht Journal of European and Comparative Law (2008), 395–413. 258



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European consumer and citizen, that regulation of gambling services is more effective at a transnational level? Why not move beyond the present ambiguity and hypocrisy and make honest and transparent choices for an adequate and performing EU gambling regulation, facing the challenges of modern society, protecting all over Europe consumers and pathological players, and all citizens against criminal effects of gambling? Why not take up this challenge through an efficient EU regulation to be implemented and controlled in the member states by the existing strong and sincere national gambling authorities, assembled together under the coordinating umbrella of a European Gambling Commission? With these suggestions I am in good company, as Cyrille Fijnaut in 2008 called for drastic action in the debate about the organization of the European gambling market: ‘Should the European Council not assume its responsibility in this matter and, with the help of the Commission and the Parliament, develop a cohesive, modern gambling policy for the whole of the EU?’16 I believe the answer is a wholeheartedly yes.

16 Fijnaut, C., Concluding Remarks, in Spapens, T., Littler, A. and Fijnaut, C. (eds.), Crime, Addiction and the Regulation of Gambling (Leiden/Boston: Martinus Nijhoff Publishers, 2008), p. 219 in fine. 259

About the Authors

Cyrille Fijnaut Cyrille Fijnaut is professor of international and comparative criminal law at the Law School of Tilburg University. In the past he was professor of criminology and criminal law at the Erasmus University Rotterdam and the K.U. Leuven. His main research interests are related to organised crime and terrorism, international police and judicial cooperation, comparative criminal procedure and police law, the history of European criminology and of policing in Europe, police and police cooperation in the Benelux. In these fields he wrote and edited some 75 books and published hundreds of articles in learned and professional journals and collected works. In the last 15 years he has worked as an expert for a number of governmental and parliamentary committees of inquiry in Belgium and the Netherlands with regard to organised and professional crime problems and in relation to security issues. Since 2005 he has a special chair, sponsored by the Dutch State Lottery, on the regulatory aspects of gambling in Europe. Etienne Marique Etienne Marique graduated in law and fiscal sciences at the ULB (Université Libre de Bruxelles) in Brussels. He started his career in 1974 as a lawyer at the Bar of Namur and later of Charleroi. In 1989, he was appointed as judge at the Court of First instance in Brussels. He then served as an examining magistrate from 1990 to 1996. In 1996, he was appointed counsellor at the Brussels’ Court of Appeal and carried out in this capacity numerous tasks within the judicial system. He was President of the Court of Assizes in Brussels from 1996 to 1998. On 16 December 1999, he was appointed Chairman of the Belgian Gaming Commission, where he still works today. You will find among his latest publications : ‘Gamblers’ protection measures’, Les jeux de hasard en Belgique, Larcier, 2009, and ‘The public policy on games of chance in Belgium’, Jeux de hasard et d’argent, Contextes et addictions, Expertise collective, Inserm, 2008.

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Alan Littler Alan Littler graduated from the University of Dundee (2002) in Law (LL.B Hons) and the University of Leiden (2003) in European Community Law (LL.M cum laude) before completing an internship in the European Commission and working briefly at the University of Leiden. In December 2009 he defended his PhD at Tilburg University, entitled Member States versus the European Union: the Regulation of Gambling (Leiden; Martinus Nijhoff, 2010). His current research interests concentrate upon the regulation of gambling and internet-based trade in the context of the EU and the General Agreement on Trade in Services of the World Trade Organisation. Ellen Heldahl Master of Laws - Uppsala university 1991. Deputy Director at the Swedish Ministry of Finance, Gambling legislation, Was chairing the working party Establishment and Services (gambling) during the Swedish presidency in the Council 2009. Currently secretary in the Inquiry Precommercial procurement and Innovation procurement. Has previously worked as head secretary in the Free Choice Inquiry for the Ministry for Health and Social Affairs, 2007-2008. State Aid legislation for the Ministry of Enterprise, 2006-2007. Senior Legal Adviser at the Association of Local and Regional Authorities, 1996-2006. Desk officer at the Ministry of Foreign Affairs. Recorder at a district court. Justin Franssen Justin is shareholder/attorney at VMW Taxand were he heads the Gaming Practise Group. The Gaming Practise Group is engaged in a number of multiyear proceedings on cross-border (internet) gaming before various national and European courts. Justin co-founded www.gaminglaw.eu, the European portal on gaming law and regulation. He is the Dutch Member of the International Masters of Gaming Law and a Member of the Board of the Research Program on Gambling Law of the University of Leuven. Justin received multiple Band 1 rankings in Chambers Global Edition in the category ‘Gaming and Gambling’. Frank Tolboom Frank is attorney at VMW Taxand and works nationally and internationally in Corporate law with a strong focus on the Gaming industry. Frank wrote his master thesis on the Dutch gambling policy in relation to European law and completed his degree (cum laude) in International and European law at the University of Utrecht, the Netherlands in 2008.

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Philippe Vlaemminck He has considerable litigation experience in the CJEU and EFTA Court and was among the very first private lawyers who were allowed to appear in a WTO dispute settlement hearing. He is deeply involved in EU regulatory issues (especially related to the EU Internal Market, Taxation & Customs law) and trade related disputes ( including the Internet gambling dispute with the US). He is the leading lawyer in the EU gaming debate and has been involved in every gambling case before the European Court of Justice and EFTA Court ( from Schindler in 1994 to Ligua Portuguesa in 2009, Ladbrokes and Betfair in 2010) as well as in all pending cases in the European Court. He was visiting professor in European Law (1998-1999 and 2000/2001) at the University of Ghent and is a member of the Brussels bar. David Miers Dr. David Miers is Professor of Law at Cardiff Law School, U.K. He has a longstanding research interest in the regulation of commercial gambling and has been regularly consulted by parliamentary, government and regulatory bodies. In 2003/04 he was Special Adviser to the Joint Committee on the Draft Gambling Bill 2004. He has given papers at many international conferences and has written extensively on both the current and earlier legal controls in this area. His book, Regulating Commercial Gambling (2004, OUP) has been described as ‘magisterial’ in its command of the subject. In February 2009 he was appointed a Member and Deputy Chair of the Gambling Commission’s Responsible Gambling Strategy Board. Nele Hoekx Nele Hoekx obtained a law degree at the K.U. Leuven (2004) and studied at the Université de Montpellier I (2002-2003). Nele started her career as a full-time researcher at the Contract and Property Research Alliance (K.U. Leuven) in 2004 and worked on a research project on the legal definition of gambling, commissioned by the Ministry of Justice. She also collaborated on a study for the European Commission on alternative means of consumer redress. In October 2010 she defended a doctoral thesis in the field of online gambling. She has published on gambling and gaming contracts. Besides gambling she mainly works in the field of Belgian contract law. Tilman Becker Tilman Becker is professor at the University of Hohenheim. His main interest is in consumer behaviour. He is the director of the gambling research center at the University of Hohenheim. The gambling research center is a multidisciplinary research center including lawyers, psychologists, economists, mathematicians

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and other disciplines. More than 20 professors from different German universities involved in gambling research are a member of this research center. Fabienne Péraldi-Leneuf Fabienne Péraldi Leneuf has held a Ph.D. in public law since 1996 (University Robert Schuman Strasbourg). Her thesis ‘The EU Policy of Technical Harmonization and Standards-Study of a New Mode of Regulation’ was awarded the Pierre-Henri Teitgen prize. Maître de conference at the University Paris-Dauphine until 2008, she held a Jean Monnet Chair and was co-director of the Master 2 programme in ‘International and European Business Law’. Appointed Professor at the University of Lille 2 in 2008 (aggregation), she is responsible for the Public Law Team and is a member of the Research Center: ‘Law and Perspectives of Law’. Her interests are in economic law and normativity in the European Union. Her research on technical standards led her to consider the production of legal norms through the study of techniques of regulation and governance, and on the process of ‘legislative drafting’. She is currently leading, with another Professor of Lille 2, a research project on the ‘conflict of norms’ as part of the ‘Research on Law and Justice’ programme. Aurélie Jouette Melchior Aurélie Jouette Melchior graduated from the University Paris Dauphine (France) in 2006 in Management Science and International Business Law and then obtained in 2007 a Master’s degree in research specialised in Business Law. To be graduated she wrote a dissertation on the French monopoly of ‘La Française des Jeux’. From then, she is a doctoral researcher at the Dauphine Institute of Law (Institut Droit Dauphine – I2D) looking at gambling and contract law. Alain-Laurent Verbeke Alain-Laurent Verbeke is Full Professor of Law at the Universities of Leuven and Tilburg and Visiting Professor of Law at Harvard Law School. In Leuven, he is the Chair of the Department of Private Law, Director of the Institute for Contract Law and Co-director of the Institute for Property Law and the Centre for Construction Law. He also is visiting Professor of Law at the VUB/ULB in Brussels and at the UCP in Lisbon. Professor Verbeke is member of several scientific and editorial boards, academic commissions and of the International Academy of Estate and Trust Law. He has written numerous academic publications in the fields of contracts, property, estate planning and negotiation. As an attorney at the Bar of Brussels, Alain-Laurent Verbeke is Founding partner with Greenille, an estate planning boutique firm with attorneys and notaries (Brussels, Antwerp & Rotterdam) and arbitrator in national (e.g. Cepina) and international (e.g. ICC) cases. 264

Appendix 1

Case C-42/07, Liga Portuguesa de Futebol Profissional and Bwin International Ltd v. Departamento de Jogos da Santa Casa da Misericórdia de Lisboa, n.y.r. JUDGMENT OF THE COURT (Grand Chamber) 8 September 2009 (*) (Reference for a preliminary ruling – Article 49 EC – Restrictions on the freedom to provide services – Offer of games of chance via the internet) In Case C‑42/07, REFERENCE for a preliminary ruling under Article 234 EC from the Tribunal de Pequena Instância Criminal do Porto (Portugal), made by decision of 26 January 2007, received at the Court on 2 February 2007, in the proceedings Liga Portuguesa de Futebol Profissional, Bwin International Ltd, formerly Baw International Ltd, v Departamento de Jogos da Santa Casa da Misericórdia de Lisboa, THE COURT (Grand Chamber), composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas and K. Lenaerts, Presidents of Chambers, A. Tizzano, J.N. Cunha Rodrigues, R. Silva de Lapuerta, K. Schiemann (Rapporteur), J. Klucˇ ka, A. Arabadjiev, C. Toader and J.-J. Kasel, Judges, Advocate General: Y. Bot, Registars: K. Sztranc-Sławiczek and B. Fülöp, Administrators, having regard to the written procedure and further to the hearing on 29 April 2008, Littler et al. (eds.), In the Shadow of Luxembourg, 265–279 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

after considering the observations submitted on behalf of: – the Liga Portuguesa de Futebol Profissional and Bwin International Ltd, by E. Serra Jorge, advogado, and by C.‑D. Ehlermann and A. Gutermuth, Rechtsanwälte,

– the Departamento de Jogos da Santa Casa da Misericórdia de Lisboa, by V. Rodrigues Feliciano, procurador-adjunto,



– the Portuguese Government, by L. Inez Fernandes, M.L. Duarte and A. Matos Barros, acting as Agents,



– the Belgian Government, by A. Hubert and L. Van den Broek, acting as Agents, assisted by P. Vlaemminck, advocaat,



– the Danish Government, by J. Liisberg, acting as Agent,



– the German Government, by M. Lumma, acting as Agent,



– the Greek Government, by N. Dafniou, O. Patsopoulou and M. Tassopoulou, acting as Agents,



– the Spanish Government, by F. Díez Moreno, acting as Agent,



– the Italian Government, by I.M. Braguglia, acting as Agent, assisted by D. Del Gaizo, avvocato dello Stato,



– the Netherlands Government, by C. Wissels and M. de Grave, acting as Agents,



– the Austrian Government, by C. Pesendorfer, acting as Agent,



– the Slovenian Government, by T. Mihelicˇ , acting as Agent,



– the Finnish Government, by J. Heliskoski, acting as Agent,



– the Norwegian Government, by P. Wennerås and J.A. Dalbakk, acting as Agents,



– the Commission of the European Communities, by E. Traversa and M. Afonso, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 14 October 2008, gives the following Judgment 1. This reference for a preliminary ruling concerns the interpretation of Articles 43 EC, 49 EC and 56 EC.

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2. The reference has been made in the course of proceedings between, on the one hand, the Liga Portuguesa de Futebol Profissional (‘the Liga’) and Bwin International Ltd (‘Bwin’), formerly Baw International Ltd, and, on the other, the Departamento de Jogos da Santa Casa da Misericórdia de Lisboa (‘Santa Casa’) concerning fines imposed on the Liga and Bwin by the directors of Santa Casa on the ground that they had infringed the Portuguese legislation governing the provision of certain games of chance via the internet. Legal framework The regulation of games of chance in Portugal 3. In Portugal games of chance are, in principle, prohibited. However, the State has reserved the right to authorise, in accordance with the system which it deems most appropriate, the operation of one or more games directly, through a State body or a body controlled directly by the State, or to grant the right to operate such games to private entities, whether profit-making or not, by calls for tender conducted in accordance with the Code of Administrative Procedure. 4. Games of chance in the form of lotteries, lotto games and sports betting are known in Portugal as games of a social nature (‘jogos sociais’) and the operation of such games is systematically entrusted to Santa Casa. 5. Each type of game of chance organised by Santa Casa is instituted separately by a decree-law and the entire organisation and operation of the various games offered by it, including the amount of stakes, the system for awarding prizes, the frequency of draws, the specific percentage of each prize, methods of collecting stakes, the method of selecting authorised distributors, and the methods and periods for payment of prizes, are covered by government regulation. 6. The first type of game in question was the national lottery (Lotaria Nacional), which was established by a royal edict of 18 November 1783, and a concession was awarded to Santa Casa, the concession being renewed regularly thereafter. Today that lottery consists in the monthly drawing of numbers by lot. 7. Following a number of legislative developments, Santa Casa acquired the right to organise other games of chance based on the drawing of numbers by lot or on sporting events. This led to the introduction of two games involving betting on football matches called ‘Totobola’ and ‘Totogolo’, respectively enabling participants to bet on the result (win, draw or loss) and the number of goals scored by the teams. There are also two lotto games, namely Totoloto, in which six numbers are chosen from a total of 49, and EuroMillions, a type of European lotto. Players of Totobola or Totoloto may also take part in a game called ‘Joker’, which consists in the drawing of a single number by lot. Lastly, there is also the

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Lotaria Instantânea, an instant game with a scratch card, commonly called ‘raspadinha’. The provision of games of a social nature via the internet 8. In 2003 the legal framework governing lotteries, lotto games and sports betting was adapted in order to take account of technical developments enabling games to be offered by electronic means, in particular the internet. Those measures feature in Decree-Law No 282/2003 of 8 November 2003 (Diário da República I, series A, No 259, 8 November 2003). They seek essentially, first, to license Santa Casa to distribute its products by electronic means and, secondly, to extend Santa Casa’s exclusive right of operation to include games offered by electronic means, in particular the internet, thereby prohibiting all other operators from using those means. 9. Article 2 of Decree-Law No 282/2003 confers on Santa Casa, through its Departamento de Jogos (Gaming Department), exclusive rights for the operation by electronic means of the games in question and for any other game the operation of which may be entrusted to Santa Casa, and states that that system covers all of the national territory, and includes, in particular, the internet. 10. Under Article 11(1) of Decree-Law No 282/2003 the following are classed as administrative offences: ‘(a). the promotion, organisation or operation by electronic means of games [the operation of which has been entrusted to Santa Casa], in contravention of the exclusive rights granted by Article 2 [of the present Decree-Law], and also the issue, distribution or sale of virtual tickets and the advertisement of the related draws, whether they take place within national territory or not; (b). the promotion, organisation or operation by electronic means of lotteries or other draws similar to those of the Lotaria Nacional or the Lotaria Instantânea, in contravention of the exclusive rights granted by Article 2, and also the issue, distribution or sale of virtual tickets and the advertisement of the related draws, whether they take place within national territory or not; …’. 11. Article 12(1) of Decree‑Law No 282/2003 sets the maximum and minimum fines for the administrative offences laid down in, inter alia, Article 11(1)(a) and (b) of that Decree-Law. For legal persons, the fine is to be not less than EUR 2 000 or more than three times the total amount deemed to have been collected from organising the game in question, provided that the triple figure is greater than EUR 2 000 but does not exceed a maximum of EUR 44 890. 268



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The organisation and activities of Santa Casa 12. The activities of Santa Casa were, at the material time, regulated by DecreeLaw No 322/91 of 26 August 1991 adopting the statutes of Santa Casa da Misericórdia de Lisboa (Diário da República I, series A, No 195, 26 August 1991), as amended by Decree-Law No 469/99 of 6 November 1999 (Diário da República I, series A, No 259, 6 November 1999) (‘Decree-Law No 322/91’). 13. The preamble to Decree-Law No 322/91 emphasises the importance of the various aspects of Santa Casa – historical, social, cultural and economic – and concludes that the Government must pay ‘specific and continuous attention in order to prevent negligence and failures … while nevertheless granting [Santa Casa] the broadest possible autonomy in the management and operation of games of a social nature’. 14. Under Article 1(1) of its statutes, Santa Casa is a ‘legal person in the public administrative interest’. The administrative organs of Santa Casa consist, by virtue of Article 12(1) of its statutes, of a director and a board of management. Pursuant to Article 13 of those statutes, the director is appointed by decree of the Prime Minister, the other members of Santa Casa’s board of management being appointed by decree of the members of the Government under whose supervision Santa Casa falls. 15. Under Article 20(1) of its statutes, Santa Casa has been given specific tasks in the areas of protection of the family, mothers and children, help for unprotected minors at risk, assistance for old people, social situations of serious deprivation, and primary and specialised health care. 16. The earnings generated by the operation of games of chance are allocated between Santa Casa and other public-interest institutions or institutions involved in social projects. Those other public-interest institutions include associations of voluntary fire crews, private social solidarity institutions, establishments for the safety and rehabilitation of handicapped persons, and the cultural development fund. 17. The operation of games of chance falls within the responsibilities of the Gaming Department of Santa Casa. That department is governed by regulations adopted, as in the case of Santa Casa’s statutes, by Decree‑Law No 322/91, and it has its own administrative and control organs. 18. In accordance with Article 5 of the regulations governing the Gaming Department, the administrative organ of that department consists of the director of Santa Casa, who is the ex officio chairman, and two deputy directors appointed by joint decree of the Minister for Employment and Solidarity and the Minister for Health. Pursuant to Articles 8, 12 and 16 of the regulations of the Gaming

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Department, the majority of the members of the committees in charge of games, draws and complaints are representatives of the public authorities, that is to say, the General Tax Inspectorate and the District Government in Lisbon. Accordingly, the chairman of the complaints committee, who has a casting vote, is a judge appointed by decree of the Minister for Justice. Two of the three members of that committee are appointed by decree of the chief tax inspector and decree of the chief administrative officer (prefect) of the District of Lisbon respectively, while the third member of the committee is appointed by the director of Santa Casa. 19. The Gaming Department has the powers of an administrative authority to open, institute and prosecute proceedings concerning offences involving the illegal operation of games of chance in relation to which Santa Casa has the exclusive rights, and to investigate such offences. Decree-Law No 282/2003 confers upon the directors of the Gaming Department, inter alia, the necessary administrative powers to impose fines as provided for under Article 12(1) of that Decree‑Law. The actions in the main proceedings and the question referred for a preliminary ruling 20. Bwin is an on-line gambling undertaking which has its registered office in Gibraltar. It offers games of chance on an internet site. 21. Bwin has no establishment in Portugal. Its servers for the on-line service are in Gibraltar and Austria. All bets are placed directly by the consumer on Bwin’s internet site or by some other means of direct communication. Stakes on that site are paid by credit card in particular, but also by other means of electronic payment. The value of any winnings is credited to the gambling account opened for the gambler by Bwin. The gambler may use that money in order to gamble or ask for it to be transferred to his bank account. 22. Bwin offers a wide range of on-line games of chance covering sports betting, casino games, such as roulette and poker, and games based on drawing numbers by lot which are similar to the Totoloto operated by Santa Casa. 23. Betting is on the results of football matches and other sporting events. The different games offered include bets on the result (win, draw or loss) of football matches in the Portuguese championship equivalent to the Totobola and Totogolo games operated exclusively by Santa Casa. Bwin also offers on-line betting in real time, in which the odds are variable and change as the sporting event in question unfolds. Information such as the match score, the time elapsed, yellow and red cards given, and so on, are displayed in real time on the Bwin internet site, thus enabling gamblers to place bets interactively as the sporting event unfolds. 24. The order for reference states that the Liga is a private-law legal person with the structure of a non‑profit‑making association, made up of all the clubs taking 270



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part in football competitions at professional level in Portugal. It organises, inter alia, the football competition corresponding to the national First Division and is responsible for the commercial operation of that competition. 25. The Liga and Bwin stated in the observations which they submitted to the Court that a sponsorship agreement, concluded by them on 18 August 2005 for four playing seasons starting in 2005/2006, made Bwin the main institutional sponsor of the First Football Division in Portugal. Under the terms of that agreement, the First Division, previously known as the ‘Super Liga’, changed its name first to the Liga betandwin.com, and then subsequently to the Bwin Liga. In addition, the Bwin logos were displayed on the sports kit worn by the players and affixed around the stadiums of the First Division clubs. The Liga’s internet site also included references and a link allowing access to Bwin’s internet site, making it possible for consumers in Portugal and other States to use the gambling services thus offered to them. 26. Subsequently, in exercising the powers conferred on them by Decree‑Law No 282/2003, the directors of the Gaming Department of Santa Casa adopted decisions imposing fines of EUR 75 000 and EUR 74 500 respectively on the Liga and Bwin in respect of the administrative offences referred to in Article 11(1)(a) and (b) of that Decree-Law. Those sums represent the aggregated amounts of two fines imposed on each of the Liga and Bwin for promoting, organising and operating, via the internet, games of a social nature reserved to Santa Casa or such similar games, and also for advertising such gambling. 27. The Liga and Bwin brought actions before the national court for annulment of those decisions, invoking, inter alia, the relevant Community rules and case-law. 28. In those circumstances, the Tribunal de Pequena Instância Criminal do Porto (Local Criminal Court, Oporto) (Portugal) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling: ‘[Do] the exclusive rights granted to Santa Casa, when relied on against [Bwin], that is to say, against a provider of services established in another Member State in which it lawfully provides similar services, which has no physical establishment in Portugal, [constitute] an impediment to the free provision of services, in breach of the principles of freedom to provide services, freedom of establishment and the free movement of payments enshrined in Articles 49, 43 and 56 of the EC Treaty [?] [Is it] contrary to Community law, in particular to the abovementioned principles, for rules of domestic law such as those at issue in the main proceedings first to grant exclusive rights in favour of a single body for the operation of lotteries and off-course betting and then to extend those exclusive rights to “the entire national territory, including … the internet”[?]’ 271

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The application to have the oral procedure reopened 29. By document lodged at the Court Registry on 30 October 2008, Bwin requested the Court to order that the oral procedure be reopened, pursuant to Article 61 of the Rules of Procedure. 30. In accordance with that provision, the Advocate General was heard in connection with that application. 31. The Court may of its own motion, or on a proposal from the Advocate General, or at the request of the parties, order the reopening of the oral procedure in accordance with Article 61 of the Rules of Procedure if it considers that it lacks sufficient information, or that the case must be dealt with on the basis of an argument which has not been debated between the parties (see, inter alia, Case C‑284/06 Burda [2008] ECR I‑4571, paragraph 37 and case-law cited). 32. However, neither the Statute of the Court of Justice nor its Rules of Procedure make provision for the parties to submit observations in response to the Advocate General’s Opinion. 33. In its application, Bwin essentially confines itself to commenting on the Opinion of the Advocate General, emphasising in particular that, in relation to a number of points of fact, the Advocate General based himself on the observations submitted by Santa Casa and the Portuguese Government, without taking into account the arguments put forward by Bwin or the Liga in order to challenge those points, or noting that those points were the subject of dispute. 34. The Court takes the view that it has all the material necessary in the present case to enable it to reply to the question referred by the national court and that the case does not have to be examined in the light of an argument that has not been the subject of discussion before it. 35. Consequently, there is no need to order the reopening of the oral procedure. The admissibility of the reference for a preliminary ruling 36. In its observations submitted to the Court, the Italian Government argues that the reference for a preliminary ruling is inadmissible on the ground that the question referred by the national court requests the Court of Justice to give a ruling on the compatibility of a provision of national law with Community law. 37. In that connection, it should be noted that the cooperative arrangements established by Article 234 EC are based on a clear division of responsibilities between the national courts and the Court of Justice. In proceedings brought on the basis of that article, the interpretation of provisions of national law is a matter for the courts of the Member States, not for the Court of Justice, and

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the Court has no jurisdiction to rule on the compatibility of national rules with Community law. On the other hand, the Court does have jurisdiction to provide the national court with all the guidance as to the interpretation of Community law necessary to enable that court to rule on the compatibility of those national rules with Community law (Joined Cases C-338/04, C-359/04 and C-360/04 Placanica and Others [2007] ECR I‑1891, paragraph 36). 38. It must be pointed out that, by its question, the national court is not asking the Court of Justice to rule on the compatibility with Community law of the specific Portuguese legislation on games of chance, but rather on certain aspects only of that legislation, which are set out in general terms. More specifically, these relate to the prohibition of all service providers other than Santa Casa, including service providers established in other Member States, from offering via the internet in Portugal games of chance which Santa Casa is authorised to operate, and any similar games. Such a reference is admissible. 39. In addition, the Italian, Netherlands and Norwegian Governments and the Commission of the European Communities question the admissibility of the reference for a preliminary ruling on the ground that it does not provide sufficient information on the content and objectives of the Portuguese legislation applicable to the dispute in the main proceedings. 40. With regard to the information that must be provided to the Court in connection with a reference for a preliminary ruling, it should be noted that that information does not serve only to enable the Court to provide answers which will be of use to the national court; it must also enable the Governments of the Member States, and other interested parties, to submit observations in accordance with Article 23 of the Statute of the Court of Justice. For those purposes, according to settled case-law, it is firstly necessary that the national court should define the factual and legislative context of the questions which it is asking or, at the very least, explain the factual circumstances on which those questions are based. Secondly, the order for reference must set out the precise reasons why the national court is unsure as to the interpretation of Community law and why it considered it necessary to refer questions to the Court for a preliminary ruling. In consequence, it is essential that the national court provide at the very least some explanation of the reasons for the choice of the Community provisions which it requires to be interpreted and of the link which it establishes between those provisions and the national legislation applicable to the dispute in the main proceedings (see Placanica and Others, paragraph 34 and the case-law cited). 41. In that connection, it is true that the precision, and even the usefulness, both of the observations submitted by the governments of the Member States and the other interested parties, and of the answer given by the Court, may depend on sufficient details being provided as to the content and objectives of the national 273

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legislation applicable to the dispute in the main proceedings. Nevertheless, in the light of the division of responsibilities between the national courts and the Court of Justice, the referring court cannot be required to make all the findings of fact and of law required by its judicial function first before it may then bring the matter before the Court. It is sufficient that both the subject-matter of the dispute in the main proceedings and the main issues raised for the Community legal order may be understood from the reference for a preliminary ruling, in order to enable the Member States to submit their observations in accordance with Article 23 of the Statute of the Court of Justice and to participate effectively in the proceedings before the Court. 42. In the main proceedings, the order for reference satisfies those requirements. The referring court has defined the factual and legislative context of the question which it has referred to the Court. In so far as the objectives of the Portuguese legislation on games of chance are not set out in the order for reference, the Court will be required to answer the question referred by having particular regard to the objectives referred to by the parties to the main proceedings and by the Portuguese Government before the Court. Accordingly, the Court takes the view that, in those circumstances, it has all the material necessary to enable it to reply to that question. 43. In the light of all those considerations, the reference for a preliminary ruling must be held to be admissible. The question referred for a preliminary ruling 44. By its question, the national court seeks a ruling from the Court on the interpretation of Articles 43 EC, 49 EC and 56 EC. The applicability of Articles 43 EC and 56 EC 45. In so far as the question referred by the national court refers not only to Article 49 EC but also to Articles 43 EC and 56 EC, it should be made clear from the outset that it is not apparent, in the light of the information in the file, that those last two articles might be applicable to the dispute in the main proceedings. 46. As to whether Article 43 EC is applicable, it is common ground that Bwin carries on its activities in Portugal exclusively via the internet, without resorting to intermediaries in Portugal and thus without having established a principal place of business or secondary establishment in that State. Similarly, it is not apparent from the file that Bwin had any intention to establish itself in Portugal. Consequently, there is nothing to suggest that the Treaty provisions on freedom of establishment might be applicable to the dispute in the main proceedings.

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47. As to whether Article 56 EC is applicable, it must be noted that any restrictive effects which the national legislation at issue in the main proceedings might have on the free movement of capital and payments would be no more than the inevitable consequence of any restrictions on the freedom to provide services. Where a national measure relates to several fundamental freedoms at the same time, the Court will in principle examine the measure in relation to only one of those freedoms if it appears, in the circumstances of the case, that the other freedoms are entirely secondary in relation to the first and may be considered together with it (see, to that effect, Case C-452/04 Fidium Finanz [2006] ECR I‑9521, paragraph 34 and case-law cited). 48. In those circumstances, the question referred by the national court must be answered in the light of Article 49 EC alone. The scope of the question referred for a preliminary ruling 49. The dispute in the main proceedings concerns the marketing in Portugal of a number of games of chance played on an electronic medium, namely the internet. Bwin, a private operator established in another Member State, offers games of chance in Portugal exclusively via the internet, and the administrative offences laid down in Article 11(1)(a) and (b) of Decree‑Law No 282/2003, of which the Liga and Bwin are accused in the main proceedings, concern exclusively conduct in relation to games of chance organised by electronic means. 50. The question referred by the national court must therefore be construed as asking in essence whether Article 49 EC precludes legislation of a Member State, such as that at issue in the main proceedings, which prohibits operators, such as Bwin, which are established in other Member States, in which they lawfully provide similar services, from offering games of chance via the internet within the territory of that first Member State. The existence of restrictions on the freedom to provide services 51. Article 49 EC requires the abolition of all restrictions on the freedom to provide services, even if those restrictions apply without distinction to national providers of services and to those from other Member States, when they are liable to prohibit, impede or render less advantageous the activities of a service provider established in another Member State where it lawfully provides similar services (see, to that effect, Case C‑76/90 Säger [1991] ECR I-4221, paragraph 12, and Case C-58/98 Corsten [2000] ECR I-7919, paragraph 33). Moreover, the freedom to provide services is for the benefit of both providers and recipients of services (see, to that effect, Joined Cases 286/82 and 26/83 Luisi and Carbone [1984] ECR 377, paragraph 16).

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52. It is accepted that the legislation of a Member State which prohibits providers such as Bwin, established in other Member States, from offering via the internet services in the territory of that first Member State constitutes a restriction on the freedom to provide services enshrined in Article 49 EC (see, to that effect, Case C-243/01 Gambelli and Others [2003] ECR I‑13031, paragraph 54). 53. Such legislation also imposes a restriction on the freedom of the residents of the Member State concerned to enjoy, via the internet, services which are offered in other Member States. 54. Consequently, as indeed the Portuguese Government expressly concedes, the legislation at issue in the main proceedings gives rise to a restriction of the freedom to provide services enshrined in Article 49 EC. The justification of the restriction of the freedom to provide services 55. It is necessary to consider to what extent the restriction at issue in the main proceedings may be allowed as a derogation expressly provided for by Articles 45 EC and 46 EC, applicable in this area by virtue of Article 55 EC, or justified, in accordance with the case-law of the Court, by overriding reasons in the public interest. 56. Article 46(1) EC allows restrictions justified on grounds of public policy, public security or public health. In addition, a certain number of overriding reasons in the public interest have been recognised by case-law, such as the objectives of consumer protection and the prevention of both fraud and incitement to squander money on gambling, as well as the general need to preserve public order (see, to that effect, Placanica and Others, paragraph 46 and case-law cited). 57. In that context, as most of the Member States which submitted observations to the Court have noted, the legislation on games of chance is one of the areas in which there are significant moral, religious and cultural differences between the Member States. In the absence of Community harmonisation in the field, it is for each Member State to determine in those areas, in accordance with its own scale of values, what is required in order to ensure that the interests in question are protected (see, inter alia, Case 34/79 Henn and Darby [1979] ECR 3795, paragraph 15; Case C-275/92 Schindler [1994] ECR  I-1039, paragraph 32; Case C-268/99 Jany and Others [2001] ECR I‑8615, paragraphs 56 and 60, and Placanica and Others, paragraph 47). 58. The mere fact that a Member State has opted for a system of protection which differs from that adopted by another Member State cannot affect the assessment of the need for, and proportionality of, the provisions enacted to that end. Those provisions must be assessed solely by reference to the objectives pursued by the competent authorities of the Member State concerned and the degree of protection 276



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which they seek to ensure (Case C-124/97 Läärä and Others [1999] ECR I‑6067, paragraph 36, and Case C-67/98 Zenatti [1999] ECR I‑7289, paragraph 34). 59. The Member States are therefore free to set the objectives of their policy on betting and gambling and, where appropriate, to define in detail the level of protection sought. However, the restrictive measures that they impose must satisfy the conditions laid down in the case-law of the Court as regards their proportionality (Placanica and Others, paragraph 48). 60. In the present case, it is thus necessary to examine in particular whether the restriction of the provision of games of chance via the internet, imposed by the national legislation at issue in the main proceedings, is suitable for achieving the objective or objectives invoked by the Member State concerned, and whether it does not go beyond what is necessary in order to achieve those objectives. In any event, those restrictions must be applied without discrimination (see, to that effect, Placanica and Others, paragraph 49). 61. In that context, it must be recalled that national legislation is appropriate for ensuring attainment of the objective pursued only if it genuinely reflects a concern to attain it in a consistent and systematic manner (Case C-169/07 Hartlauer [2009] ECR I‑0000, paragraph 55). 62. The Portuguese Government and Santa Casa submit that the main objective pursued by the national legislation is the fight against crime, more specifically the protection of consumers of games of chance against fraud on the part of operators. 63. In that connection, it should be noted that the fight against crime may constitute an overriding reason in the public interest that is capable of justifying restrictions in respect of operators authorised to offer services in the games-ofchance sector. Games of chance involve a high risk of crime or fraud, given the scale of the earnings and the potential winnings on offer to gamblers. 64. The Court has also recognised that limited authorisation of games on an exclusive basis has the advantage of confining the operation of gambling within controlled channels and of preventing the risk of fraud or crime in the context of such operation (see Läärä and Others, paragraph 37, and Zenatti, paragraph 35). 65. The Portuguese Government submits that the grant of exclusive rights to Santa Casa to organise games of chance ensures that the system will function in a secure and controlled way. First, Santa Casa’s long existence, spanning more than five centuries, is evidence of that body’s reliability. Second, the Portuguese Government points out that Santa Casa operates under its strict control. The legal framework for games of chance, Santa Casa’s statutes and government involvement in appointing the members of its administrative organs enable the

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State to exercise an effective power of supervision over Santa Casa. That system, based on legislation and Santa Casa’s statutes, provides the State with sufficient guarantees that the rules for ensuring fairness in the games of chance organised by Santa Casa will be observed. 66. In that regard, it is apparent from the national legal framework, set out in paragraphs 12 to 19 of the present judgment, that the organisation and functioning of Santa Casa are governed by considerations and requirements relating to the pursuit of objectives in the public interest. The Gaming Department of Santa Casa has been given the powers of an administrative authority to open, institute and prosecute proceedings involving offences of illegal operation of games of chance in relation to which Santa Casa has the exclusive rights. 67. In that connection, it must be acknowledged that the grant of exclusive rights to operate games of chance via the internet to a single operator, such as Santa Casa, which is subject to strict control by the public authorities, may, in circumstances such as those in the main proceedings, confine the operation of gambling within controlled channels and be regarded as appropriate for the purpose of protecting consumers against fraud on the part of operators. 68. As to whether the system in dispute in the main proceedings is necessary, the Portuguese Government submits that the authorities of a Member State do not, in relation to operators having their seat outside the national territory and using the internet to offer their services, have the same means of control at their disposal as those which they have in relation to an operator such as Santa Casa. 69. In that regard, it should be noted that the sector involving games of chance offered via the internet has not been the subject of Community harmonisation. A Member State is therefore entitled to take the view that the mere fact that an operator such as Bwin lawfully offers services in that sector via the internet in another Member State, in which it is established and where it is in principle already subject to statutory conditions and controls on the part of the competent authorities in that State, cannot be regarded as amounting to a sufficient assurance that national consumers will be protected against the risks of fraud and crime, in the light of the difficulties liable to be encountered in such a context by the authorities of the Member State of establishment in assessing the professional qualities and integrity of operators. 70. In addition, because of the lack of direct contact between consumer and operator, games of chance accessible via the internet involve different and more substantial risks of fraud by operators against consumers compared with the traditional markets for such games. 71. Moreover, the possibility cannot be ruled out that an operator which sponsors some of the sporting competitions on which it accepts bets and some of the 278



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teams taking part in those competitions may be in a position to influence their outcome directly or indirectly, and thus increase its profits. 72. It follows that, in the light of the specific features associated with the provision of games of chance via the internet, the restriction at issue in the main proceedings may be regarded as justified by the objective of combating fraud and crime. 73. Consequently, the answer to the question referred is that Article 49 EC does not preclude legislation of a Member State, such as that at issue in the main proceedings, which prohibits operators such as Bwin, which are established in other Member States, in which they lawfully provide similar services, from offering games of chance via the internet within the territory of that Member State. Costs 74. Since these proceedings are, for the parties to the main proceedings, a step in the actions pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules: Article 49 EC does not preclude legislation of a Member State, such as that at issue in the main proceedings, which prohibits operators such as Bwin International Ltd, which are established in other Member States, in which they lawfully provide similar services, from offering games of chance via the internet within the territory of that Member State.

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EUROPEAN PARLIAMENT Session document A6-0064/2009 17.2.2009

REPORT on the integrity of online gambling (2008/2215(INI)) Committee on the Internal Market and Consumer Protection Rapporteur: Christel Schaldemose

MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION on the integrity of online gambling (2008/2215(INI)) The European Parliament, – having regard to Article 49 of the EC Treaty,

– having regard to the Protocol on the application of the principles of subsidiarity and proportionality annexed to the EC Treaty,



– having regard to the case-law developed by the Court of Justice of the European Communities1,

1 Schindler 1994 (C-275/92), Läärä 1999 (C-124/97), Zenatti 1999 (C-67/98), Anomar 2003 (C-6/01), Gambelli 2003 (C-243/01), Lindman 2003 (C-42/02), Placanica 2007 (C-338/04), Unibet 2007 (C- 432/05), UNIRE 2007 (C– 260/04). Littler et al. (eds.), In the Shadow of Luxembourg, 281–293 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

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– having regard to Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market2 (Services Directive),



– having regard to Directive 2007/65/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities3 (Directive on audiovisual media services),



– having regard to Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce)4,



– having regard to Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing5,



– having regard to its resolution of 8 May 2008 on the White Paper on Sport6,



– having regard to the Oral Question by the Committee on the Internal Market and Consumer Protection to the Commission of 16 October 2006 on gambling and sports betting in the Internal Market7 and to the following debate in the Committee on the Internal Market and Consumer Protection on 14 November 2006, and to the answer given by the Member of the Commission,



– having regard to the briefing paper on Online gambling, focusing on integrity and a code of conduct for gambling, prepared for the European Parliament by Europe Economics Research Ltd,



– having regard to the study of Gambling Services in the Internal Market of the European Union dated 14 June 2006, prepared for the Commission by the Swiss Institute of Comparative Law (SICL),

2 OJ L 376, 27.12.2006, p. 36. 3 OJ L 332, 18.12.2007, p. 27. 4 OJ L 178, 17.7.2000, p. 1. 5 OJ L 309, 25.11.2005, p. 15. 6 Texts adopted, P6_TA(2008)0198. 7 O-0118/2006. 282



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– having regard to Rule 45 of its Rules of Procedure,



– having regard to the report of the Committee on the Internal Market and Consumer Protection (A6-0064/2009),

A. whereas, at present, online gambling, worth EUR 2 to 3 billion in gross gaming revenues in 2004, accounts for roughly 5% of the total gambling market in the EU, as noted by the above-mentioned study by SICL, and rapid growth seems inevitable, B. whereas the revenue generated by government and government-authorised gambling activities is by far the most important source of income for sports organisations in many Member States, C. whereas gambling activities, including online gambling, have traditionally been strictly regulated in all Member States on the basis of the principle of subsidiarity, in order to protect consumers against addiction and fraud, to prevent money-laundering and other financial crimes, as well as match-fixing, and to preserve public order; whereas the European Court of Justice accepts restrictions of the freedom of establishment and the freedom to provide services in the light of such general interest objectives, if proportionate and non-discriminatory, D. whereas all Member States have differentiated such restrictions according to the type of gambling service concerned, such as casino games, sports betting, lotteries or betting on horse-races; whereas the majority of Member States prohibit the operation – including by local operators – of online casino games, and a significant number prohibit in the same way the operation of online sports betting and online lotteries, E. whereas gambling activities were excluded from the scope of Directives 2006/123/EC (Services Directive), 2007/65/EC (Directive on audiovisual media services) and 2000/31/EC (Directive on electronic commerce), and Parliament voiced its concern at a possible deregulation of gambling in its resolution of 8 May 2008 on the White Paper on Sport, F. whereas Member States have regulated their traditional gambling markets in order to protect consumers against addiction, fraud, money-laundering and match-fixing; whereas these policy objectives are more difficult to achieve in the online gambling sector, G. whereas  the Commission has launched infringement proceedings against ten Member States in order to verify whether national measures limiting the cross-border supply of online gambling services, mainly sports betting, are compatible with Community law; whereas, as the Commission has highlighted, these proceedings do not touch upon the existence of monopolies or national

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lotteries as such, nor do they have any implication for the liberalisation of gambling markets in general, H. whereas an increasing number of preliminary questions on gambling-related cases are being referred to the European Court of Justice, which clearly demonstrates a lack of clarity on the interpretation and application of Community law with respect to gambling, I. whereas integrity in the context of this resolution on online gambling means a commitment to preventing not only fraud and crime but also problem gambling and under-age gambling by compliance with consumer protection and criminal laws and by protecting sporting competitions from any undue influence associated with sports betting, J. whereas online gambling combines several risk factors related to problem gambling, such as, among others, easy access to gambling, the availability of a variety of games and fewer social constraints8, K. whereas sports betting activities and other online games have developed rapidly and in an uncontrolled manner (particularly cross-border over the internet), and the ever present threat of match-fixing and the phenomenon of “lay bets” on specific events in sports matches makes sports particularly vulnerable to illegal betting behaviour, A transparent sector that safeguards the public and consumer interests 1. Highlights that, in accordance with the principle of subsidiarity and the case law of the European Court of Justice, Member States have an interest and right to regulate and control their gambling markets in accordance with their traditions and cultures in order to protect consumers against addiction, fraud, moneylaundering and match-fixing in sports, as well as to protect the culturally-built funding structures which finance sports activities and other social causes in the Member States; highlights that all other stakeholders as well have an interest in a well-monitored and regulated gambling market; underlines that online gambling operators must comply with the legislation of the Member State in which they provide their services and the consumer resides; 2. Stresses that gambling services are to be considered as an economic activity of a very special nature due to the social and public order and health care aspects linked to it, where competition will not lead to a better allocation of resources,

8 Opinion of Advocate General Bot of 14 October 2008 in Case C-42/07; see also the above-mentioned study by SICL at p. 1450; Professor Gill Valentine, Literature review of children and young people’s gambling (Commissioned by the UK Gambling Commission), September 2008. 284



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which is the reason why gambling requires a multi-pillar approach; emphasises that a pure Internal Market approach is not appropriate in this highly sensitive area, and requests the Commission to pay particular attention to the views of the European Court of Justice regarding this matter; 3. Endorses the work that has started in the Council under the French Presidency addressing issues in the field of online and traditional gambling and betting; calls on the Council to continue holding formal discussions about a potential political solution as to how to define and tackle problems arising from online gambling, and calls on the Commission to support this process and to carry out studies and make appropriate proposals considered desirable by the Council for the attainment of common objectives in the area of online gambling; 4. Calls on the Member States to cooperate closely in order to solve the social and public order problems arising from cross-border online gambling, such as gambling addiction and misuse of personal data or credit cards; calls on the EU institutions to cooperate closely with the Member States in the fight against all unauthorised or illegal online gambling services offered and to protect consumers and prevent fraud; stresses the need for a common position on how to do this; 5. Stresses that regulators and operators should closely cooperate with other stakeholders operating in the field of online gambling, e.g. gambling operators, regulators, consumer organisations, sports organisations, industry associations and the media, which share a joint responsibility for the integrity of online gambling and for informing consumers of the possible negative consequences of online gambling; Tackling fraud and other criminal behaviour 6. Notes that criminal activities, such as money-laundering, and black economies can be associated with gambling activities and impact on the integrity of sports events; considers that the threat to the integrity of sport and sporting competitions impacts heavily on grassroots participation, a key contributor to public health and social integration; is of the opinion that, if a sport is perceived as the subject of manipulation for the financial gain of players, officials or third parties rather than played according to its values, rules and for the enjoyment of its fans, this could result in a loss of public trust; 7. Is of the opinion that the growth of online gambling provides increased opportunities for corrupt practices such as fraud, match-fixing, illegal betting cartels and money-laundering, as online games can be set up and dismantled very rapidly and as a result of the proliferation of offshore operators; calls on the Commission, Europol and other national and international institutions to closely monitor and report on findings in this area;

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8. Considers that the protection of the integrity of sports events and competitions requires cooperation between sports rights owners, online betting operators and public authorities at national as well as EU and international level; 9. Calls on the Member States to ensure that sports competition organisers, betting operators and regulators cooperate on measures to tackle the risks related to illegal betting behaviour and match-fixing in sport and explore the establishment of a workable, equitable and sustainable regulatory framework to protect the integrity of sports; 10. Highlights that sports bets are a form of commercial exploitation of sporting competitions, and recommends that Member States protect sporting competitions from any unauthorised commercial use, notably by recognition of a sport organisers right, and put in place arrangements to ensure fair financial returns for the benefit of all levels of professional and amateur sport; calls on the Commission to examine whether it is possible to give competition organisers an intellectual property right (some sort of portrait right) over their competitions; Prevention of consumer detriment 11. Considers that the potential omnipresent opportunity provided by the internet to gamble online in privacy, with immediate results and with the possibility of gambling for large sums of money, creates new potential for gambling addiction; notes, however, that the full impact on consumers of the specific forms of gambling services offered online is not yet known and should be researched in a more detail; 12. Draws attention to the growing concern about young people’s ability to access online gambling opportunities, both legally and illegally, and stresses the need to have more effective age checks and to prevent underage gamblers from playing free demos on websites; 13. Points out that young people in particular may have trouble differentiating between the concepts of luck, fate, chance and probability; urges Member States to address the key risk factors which may increase the likelihood of a (young) person developing a gambling problem, and to find the tools to target those factors; 14. Is concerned by the increasing cross-over between interactive television, mobile phones and internet sites in offering remote or online gambling games, particularly those aimed at minors; considers that this development will pose new regulatory and social protection challenges; 15. Is of the opinion that online gambling is likely to give rise to risks to consumers and that Member States may therefore legitimately restrict the freedom to provide online gambling services in order to protect consumers;

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16. Stresses that parents have a responsibility to prevent under-age gambling and gambling addiction by minors; 17. At the same time, calls on Member States to allocate adequate funding for research into, and the prevention and treatment of, problems relating to online gambling; 18. Considers that profits from gambling should be used for the benefit of society, including rolling funding for education, health, professional and amateur sport and culture; 19. Supports the development of standards for online gambling regarding age limits, a ban on credit and bonus schemes to protect vulnerable gamblers, information about the possible consequences of gambling, information about where to obtain help in case of addiction, the potential addictiveness of certain games, and so on; 20. Calls on all stakeholders to address the risk of social isolation caused by online gambling addiction; 21. Considers that self-regulation regarding the advertising, promotion and provision of online games is not sufficiently effective and therefore emphasises the need for both regulation and cooperation between the industry and the authorities; 22. Urges Member States to cooperate at EU level to take measures against any aggressive advertising or marketing by any public or private operator of online gambling, including free demonstration games, to protect in particular gamblers and vulnerable consumers such as children and young people; 23. Suggests examining the possibility of introducing a maximum amount that a person can use for gambling activities per month, or of obliging online gambling operators to make use of prepaid cards for online gambling to be sold in shops; Code of Conduct 24. Notes that a Code of Conduct may still be a useful supplementary tool for achieving some public (and private) objectives and to take account of technological developments, changes in consumer preferences or developments in market structures; 25. Stresses that a Code of Conduct ultimately remains an industry-driven, self-regulatory approach and can therefore only serve as an addition to, not a replacement of, legislation;

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26. Also stresses that the effectiveness of a Code of Conduct will heavily depend on its recognition by national regulators and consumers, as well as on its enforcement; Monitoring and research 27. Calls on the Member States to document the extent and growth of their online gambling markets, as well as the challenges which arise from online gambling; 28. Calls on the Commission to initiate research on online gambling and the risk of developing a gambling addiction, for example how advertising influences gambling addiction, whether it is possible to create a common European categorisation of games according to addictive potential, and possible preventive and curative measures; 29. Calls on the Commission to examine in particular the role of advertising and marketing (including free online demonstration games) in encouraging, directly or implicitly, under-age young people to gamble; 30. Calls on the Commission, Europol and the national authorities to collect and share information about the extent of fraud and other criminal behaviour in the online gambling sector, e.g. amongst actors involved in the sector; 31. Calls on the Commission to study, in close cooperation with national governments, the economic and non-economic effects of the provision of cross-border gambling services in relation to integrity, social responsibility, consumer protection and matters relating to taxation; 32. Stresses the importance for the Member State of the residence of the consumer to be able to effectively control, limit and supervise gambling services provided on its territory; 33. Calls on the Commission and the Member States to clarify the place of taxation of online gambling activities; °° 34. Instructs its President to forward this resolution to the Council and Commission.

EXPLANATORY STATEMENT I. Introduction Gambling activities involve wagering a stake with monetary value in games of chance, including lotteries and betting transactions.

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Online gambling has existed since 1996, where the first game was made available in Finland. Since then the market for online gambling has grown considerably. In 2003, it was estimated that the commercial online gambling market in EU 25 generated Gross Gaming Revenues (operator winnings less payments of prizes) of € 51.5 billion in 2003. At present, online gambling via Internet, mobile phones or interactive TV accounts for roughly 5 % of the total gambling market in the EU, worth € 2 to 3 billion in annual Gross Gaming Revenues in 2004. The European online gambling market is expected to grow at a minimum rate of 8.4 per cent per annum (in Austria and Hungary) to a maximum of 17.6 per cent (in Italy).9 Member States are therefore forced to adapt and develop regulation in order to keep pace with consumer preferences and suppliers’ services. The specific nature of online gambling causes certain difficulties for policy-makers in the Member States. First of all, online gambling entails a cross-border element, which makes it possible for online gambling operators to provide their services to consumers in other Member States than the one they are based in. Consumers may therefore not know in which country their service provider is based. Secondly, online gambling creates an increased risk of online gambling providers not being able to verify the identity of the consumer since the person using a credit card may not be its rightful owner. Thirdly, online gambling sites can be set up quickly and dishonest operators can therefore appear and disappear within a short period of time. Fourthly, it is difficult for online gambling operators to supervise their customers as opposed to conventional gambling where it is possible to see whether the customer is under age, is drunk or in other ways intoxicated or behaving suspiciously. Also since access to online gambling services is easy and can be done in isolation, social checks and constraints that can be exercised by the presence of others are lacking. II. Regulation The European online gambling markets are regulated nationally in accordance with the principle of subsidiarity. Therefore the regulatory frameworks for the (conventional and online) gambling market in the EU are very much heterogeneous. In twenty EU Member States online gambling is allowed, whereas seven Member States have prohibited online gambling. Thirteen Member States have a liberalised market, while six have state-owned monopolies and one Member State has licensed a private monopoly.10

9 PricewaterhouseCoopers’ Global Entertainment and Media Outlook: 2008-2012, p. 623. Growth is measured as the compound increase in annual gambling revenue. 10 Online Gambling, a briefing paper for the European Parliament, Europe Economics, XX October 2008 289

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The Member States who have banned online gambling altogether or allow it only under monopoly conditions argue that these limitations are justified on grounds of social and public order. However, there have been great disputes regarding the so-called national gambling monopolies. Numerous complaint have been filed with the European Commission by gambling companies, private persons and media organisations claiming that certain Member States are unlawfully protecting their gambling markets and the revenues arising from their monopolies. As a result the Commission has started infringement procedures against ten Member States, in order to verify whether national measures limiting the cross-border supply of online gambling are compatible with Community law.11 The issue of regulating EU gambling markets, whether conventional or online, is very sensitive. But there is a clear need for clarification about the regulatory environment concerning online gambling. At present, several cases pending at the European Court of Justice right now are related to gambling. This situation is dissatisfactory for the Court as well as Member States, consumers and online gambling providers. A number of cases regarding gambling have been referred to the European Court of Justice, some of which have already been settled (case law below) and many of which are still pending. The case law by the European Court of Justice consists of the following cases: Schindler 1994 (C-275/92), Läärä 1999 (C-124/97), Zenatti 1999 (C-67/98), Anomar 2003 (C-6/01), Gambelli 2003 (C-243/01), Lindman 2003 (C-42/02), Placanica 2007 (C-338/04), Unibet 2007 (C – 432/05) and UNIRE 2007 (C – 260/04). In these cases The European Court of Justice has stated that freedom of movement (Article 49 of the EU Treaty) applies to gambling services. However the court has also stated that gambling may entail certain moral, religious and cultural aspects, involve a high risk of crime or fraud and may have damaging individual and social consequences.12 Restrictions may therefore be justified if they are necessary for consumer protection, for maintenance of the public order (prevention of fraud and crime), for maintaining of the social order (culture or morale) and for preventing gambling from being a source of private profit.13 However, restrictions must serve to limit betting activities in a consistent and systematic manner, they must be applied in a non-discriminatory manner and they must not go beyond what is necessary to attain the end in view.14 It should also be noted that on 14 November 2006, Commissioner McCreevy responded to the Oral Question on Gambling posed by Arlene McCarthy, Chair 11 http://ec.europa.eu/internal_market/services/gambling_en.htm 12 EJC in the Schindler judgment, C-275/92 13 SICL (2006), p. xxvi 14 Gambelli judgement C-243/01 290



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of the Committee on Internal Market and Consumer Protection, during the European Parliament’s plenary session in Strasbourg. Here, the commissioner stated that EU-wide harmonisation of legislation regulating gambling at present was not likely. III. Integrity The object of this report is to focus on the integrity of online gambling. Integrity is first seen as a set of values which aim at preventing fraud: by online gambling operators against consumers or by consumers against online gambling operators or consumers against other consumers. Integrity in this sense also includes all means to avoid criminal activities such as money-laundering. In this report integrity is also looked at as the behaviour of online gambling operators. Therefore, this report covers addictive and under-age gambling as well. Most consumers are able to gamble without risking a psychological addiction, however a small but significant number of individuals risk becoming problem gamblers. WHO defines problem gambling as any excessive gambling that leads to financial, social and/or psychological disorders.15 The risk of an addiction to gambling is generally aggravated by the permanent availability of the opportunity to play, the frequency of wins, the enticing or attractive nature of games, the possibility of staking large sums, the availability of credit in order to play, the location of games at places where people can play on an impulse, and the fact that there is no information campaign regarding the risks of gaming.16 Online gambling combines several of such risk factors related to problem gambling. For instance, online operators are able to offer a wide variety of games (betting, roulette, poker, slot machines, etc) and to introduce new games regularly, using new marketing and targeting techniques, involving the latest data research technology on the customers’ (spending) behaviour, keeping the consumer ‘glued’ to the screen. A worrying aspect is the increasing cross-over between multimedia services, such as television, phone- and SMS-services and internet sites, in offering remote or online games, making it easy and socially acceptable to participate in those games, especially for younger people.

MINORITY OPINION pursuant to Rule 48(3) of the Rules of Procedure 15 WHO (1992) The ICD-10 Classification of mental and behavioural disorders, Geneva. Other commonly used terms include pathological, compulsive, disordered, excessive and addictive gambling. 16 Opinion of Advocate General Bot to the ECJ, 14 October 2008, Case C-42/07; see also SICL (2006), p. 1450 291

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Malcolm Harbour, Colm Burke, Charlotte Cederschiöld, Giles Chichester, Bill Newton Dunn, Małgorzata Handzlik, Christopher Heaton-Harris, Zita Pleštinská, Salvador Domingo Sanz Palacio, Andreas Schwab, Marian Zlotea. We are concerned that the content of the report goes beyond the remit of the initiative which intended to focus on the transparency of the online gaming market, the integrity of online gambling operators and the possible consumer detriment caused by the online gaming industry. We consider that the report undermines some of the principles of the Single Market, that key aspects of the online gambling market may be misunderstood and that the report does not adequately reflect the situation in all Member States. Well functioning and well regulated markets already exist in certain Member States that allow consumers to play in a safe and secure online environment. We accept that the advent of the Internet poses consumer protection challenges in the long term but these can be effectively regulated, without prohibition; notes the work already done by responsible European operators to improve standards and ensure consumer safety. We would like to emphasise the advances already made by some jurisdictions in developing regulatory regimes and the potential benefits of more open yet effectively regulated markets; notes also the practical and legal limitations of proposed methods to block online service provision.

RESULT OF FINAL VOTE IN COMMITTEE Date adopted

11.2.2009

Result of final vote

+: 32 –: 10 0: 0

Members present for the final vote

Mogens Camre, Charlotte Cederschiöld, Gabriela Cret.u, Janelly Fourtou, Evelyne Gebhardt, Martí Grau i Segú, Małgorzata Handzlik, Malcolm Harbour, Anna Hedh, Edit Herczog, Pierre Jonckheer, Kurt Lechner, Lasse Lehtinen, Toine Manders, Catiuscia Marini, Arlene McCarthy, Nickolay Mladenov, Catherine Neris, Bill Newton Dunn, Zita Pleštinská, Karin Riis-Jørgensen, Zuzana Roithová, Heide Rühle, Leopold Józef Rutowicz, Salvador Domingo Sanz Palacio, Christel Schaldemose, Eva-Britt Svensson, Jacques Toubon, Bernadette Vergnaud, Barbara Weiler

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Substitute(s) present for the final Emmanouil Angelakas, André Brie, Colm vote Burke, Giles Chichester, Joel Hasse Ferreira, Filip Kaczmarek, Andrea Losco, Manuel Medina Ortega, José Ribeiro e Castro Substitute(s) under Rule 178(2) present for the final vote

Daniel Hannan, Alexandru Nazare, Giovanni Rivera

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European Council, Gambling and betting: legal framework and policies in the Member States of the European Union, Presidency Progress Report, 16022/08, 27 November 2008

COUNCIL OF THE EUROPEAN UNION Brussels, 27 November 2008 NOTE from: Presidency to: Council (Competitiveness) Subject: Gambling and betting: legal framework and policies in the Member States of the European Union Presidency Progress Report Delegations will find attached a progress report on the above topic, drafted by the Presidency with a view to the Competitiveness Council on 1 and 2 December 2008.

I. INTRODUCTION 1. Following the meeting of the Permanent Representatives Committee on 2 July 2008, the Presidency initiated discussions in the Working Party on Establishment and Services on the legal framework for gambling and betting and the policies of the Member States of the European Union thereon. 2. In that context, the Presidency sent the delegations a questionnaire on the rules and policies applied in each Member State. The questionnaire dealt with the general organisation of the sector, the cross-border aspects of gambling, and policy objectives and instruments. The ensuing discussions on the basis of that questionnaire benefited from the delegations’ very substantial contributions (see Littler et al. (eds.), In the Shadow of Luxembourg, 295–310 ©2011 Koninklijke Brill NV. ISBN 978 90 04 19246 1. Printed in the Netherlands.

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

attached summary) which contained many points of relevance to the proceedings of the Council’s preparatory bodies. 3. The Presidency’s intention was for the discussions during its term in office to be without any preconceived idea as to the outcome. They were conducted in a horizontal working party specialising in matters relating to the internal market in services, without prejudice to the competences of the different European Union institutions and Council bodies. 4. This Presidency report is intended to inform the Council of the outcome of the discussions and to suggest options for further proceedings.

II. NATIONAL POLICIES FACING COMMON CHALLENGES The differences in the national models for organising and regulating the gambling and betting sector 5. The replies to the questionnaire illustrate the diversity of the models adopted by the Member States to organise the gambling and betting sector.1 Diverse considerations, such as ethical, philosophical, cultural and social ones have influenced legislation in most Member States, leading to the development of different models, particularly as regards the forms of gambling allowed and how open the sector is, how it is regulated and taxed. 6. In all the Member States, the various forms of gambling and betting are permitted to varying degrees and are submitted to specific regulation rules. Underlying the legislation of half of the Member States (Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovakia) is the principle that gambling is illegal unless authorised, whereas in other Member States gambling and betting is more open, though regulated. Casino games, slot machines and betting on events other than sporting contests and horse racing are the most frequently restricted forms. The rules on access to online gambling and betting are frequently more restrictive: six Member States ban it entirely (Cyprus, Germany, Estonia, Greece, The Netherlands, Poland) ; others, while not going as far as banning it, apply additional restrictions on online gambling, particularly regarding casinos. Another group of member States have introduced open, though regulated, systems.

1 It should be noted that although most of the various types of gambling exist in all the Member States, definitions may vary. While more in-depth discussions on the subject could clarify matters, the Presidency has wished at this stage to opt for the broadest definition and focus on gambling and betting as a whole. 296



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7. As far as market structure is concerned, in most Member States the different sectors of the gambling and betting industry (lotteries, sports betting and betting on horse racing, casinos, slot machines, bingo and the other forms of gambling and betting) are governed by different rules. Lotteries are in most cases run as monopolies or under exclusive rights granted to state bodies or private, often non-profit, bodies. In almost half the Member States, betting is subject to a system of licences open to a number of operators, while in a large number of Member States there are restrictions on the number of casinos, where they are situated and who can run them. 8. Responsibility for regulating the sector usually lies with one or more ministries, often the Ministry of Finance. However, some Member States have a specific body operating under the aegis of the relevant ministry, which is responsible for issuing authorisations and monitoring operators, and some others have an independent authority. Local authorities are also frequently involved in granting licences for gambling and betting premises. Significant similarities in gambling policy objectives and instruments 9. While the legal frameworks differ, there are significant similarities in the Member States objectives as regards gambling and betting. These similarities result from recognition of the specific nature of gambling and betting, particularly the risks involved. The Member States are widely influenced by considerations of public order and prevention of crime (combating money laundering, organised crime, fraud, corruption etc.), social order (prevention of addiction, protection of minors and vulnerable persons etc.), and consumer protection (ensuring that gambling operations and operators are trustworthy, etc.). 10. A variety of arrangements have been devised and implemented to attain these converging aims. The following tools are used in a large number of Member States: a ban on access to gambling by minors or vulnerable persons; obligatory identity checks at the entrances to casinos and gaming halls; restrictions on amounts of bets or winnings; advertising restrictions and obligation to inform players of the risks of gambling; checks on the owners and managers of private companies before granting authorisations or licences; rules on the player return rate; mandatory reporting of transactions. An industry with major economic and social implications 11. Whatever the exact form of organisation used, another major similarity between almost all Member States is the importance of the sector in funding certain activities in light of the general interest objectives involved. 12. Apart from the state levies to which they are subject, gambling and betting very frequently contribute substantial amounts, totalling billions of euros 297

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annually EU-wide, to numerous causes: social, charitable or cultural activities, support for sport or equine organisations,2 etc. New common challenges 13. The development of online gambling raises new challenges. Online gambling and betting is permanently available, crosses borders, is widespread and easy to access. The Member States have opted for widely differing responses to this development, ranging from opening up the market in a regulated framework to a complete ban. However, there are common issues surrounding the regulation of cross-border operators and the services they offer in terms of the objectives of public order, social order and consumer protection, including the adoption of tools to control and tax online gambling and to combat unauthorised gambling operators. 14. The Member States also have to take into account recent legal developments in the area when developing their national policies and rules. In the absence of specific secondary law, the organisation of the sector falls within the competence of the Member States. They must comply with the rules of the Treaty, in particular those on freedom of movement, as interpreted by the Court of Justice, which has consistently ruled that gambling and betting are economic activities which thus fall within the scope of Articles 43 and 49 EC, but whose special nature is recognised. In this framework, every Member State is free to determine how its gambling sector is organised and if necessary partition it in line with the objectives it is pursuing and the special nature of the market. While restrictions may therefore be imposed, they must be proportionate, non-discriminatory, consistent and systematic in keeping with the case law developed over time. 15. These common issues and challenges are of particular relevance at this time, when over half of the Member States have begun reforming their national legislation3 or have recently carried out such a reform.4

III. COMMON THEMES FOR DISCUSSION 16. Until now, the issues related to gambling and betting could be dealt with in a national framework. However, the common challenges identified would

2 On the importance of the industry in sports funding, see the European Parliament’s Resolution of 8 May 2008 on the white paper on sport (2007/2261 (INI)). 3 Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Estonia, Finland, France, Hungary, Ireland, Lithuania, Poland, Romania and Sweden. 4 Germany, Italy, Latvia, United Kingdom and, in 2002, Malta. 298



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appear to make new reflections at EU-level appropriate. In accordance with the principle of subsidiarity, the different national models developed in compliance with Community law should be respected, be that they include a heavy regulation or a prohibition of online gambling and betting, and the focus should be on how to safeguard the objectives assigned to gambling policies. 17. Any progress will help the industry to operate more efficiently, be better regulated and increase confidence among Member States. Where access to a market requires the issue of a licence or authorisation, moving towards shared principles, especially on control, could facilitate the approval of operators already authorised in other Member States. In the absence of harmonisation, each Member States will nevertheless remain free, in keeping with Community law, to regulate gambling and betting and to require operators established outside its jurisdiction to obtain authorisations in accordance with its own rules. Protection of public order 18. In safeguarding public order, in particular combating money laundering, fraud and corruption, enhanced cooperation between national regulatory bodies appears to be necessary. This could involve exchange of good practice and information on authorised gambling operators, the requirements of national legislation to which they are subject and checks carried out. 19. Exchanges would also be useful on the instruments and procedures operated by the Member States to control gambling and betting, particularly online gambling and betting. Topics for discussion could include methods for real-time checking of players and transactions, or mandatory reporting of transactions and verification methods. Exchanges could also be conducted with sporting bodies, to examine the potential for fraud and cheating in betting and possible solutions. 20. The Presidency believes that consideration could also be given, in due course and with due respect to the competences of different institutions and Council bodies, to the idea of extending the requirements regarding customer identification and reporting under the third money-laundering Directive (Directive 2005/60/ EC)5 to all gambling operators established in the Community, as has already been done in some Member States.

5 Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on prevention of the use of the financial system for the purposes of money laundering and terrorist financing. 299

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Social and consumer protection 21. On social and consumer protection, the discussions within the Council could focus on common issues and measures, taking account of any input from the other EU institutions.6 Preventing and combating problem gambling 22. This is widely regarded as a key issue, and information on approaches to the problem and any current rules could be shared. This could cover the framework for the provision and uptake of gambling (for example rules limiting the size of the stakes or the winnings, or putting a ceiling on the player return rate) and national research programmes on gambling addiction. The idea of a joint research programme on this subject could be explored as well as joint actions on public awareness campaigns, promotion of responsible gambling and education. Protection of minors and vulnerable persons 23. The protection of minors and vulnerable persons is a concern already shared by all Member States. There could be exchanges on the relevant rules, exploring the possibility of a common approach on access of such persons to gambling and betting. It would also be useful to identify collectively the appropriate tools for ensuring that such rules work properly, particularly online (e.g. schemes for age and credit card checks). The following tools could also be looked into: banning gambling on credit; obligation to propose self-restriction or even self-exclusion schemes to gamblers. Consumer protection 24. The guarantee of trustworthy gambling operators and operations is an essential component of gambling policy and it is important to ensure that legal gambling should be seen as fair and transparent. Arrangements are at present essentially a matter for the Member States. However, exchanges could be conducted within the Council on matters such as consumer information (common principles, practical arrangements). 25. Gambling operators, particularly at European level, have also adopted schemes such as charters and codes of good conduct. Initiatives such as these could be presented to the Council’s preparatory bodies and then examined, in order to identify their possible contributions and to draw appropriate conclusions.

6 See the current proceedings in the European Parliament on the integrity of online gambling. 300



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Advertising 26. The advertising of gambling and betting could be discussed. Topics could include the introduction of obligations to inform the public of the risks or the regulation or even restriction of certain forms of advertising, e.g. to minors. Combating gambling regarded as illegal 27. Because of the wide range of approaches adopted in response to the growth of online gambling, particularly its cross-border dimension, the definition of unauthorised operator varies from one Member State to another. The different national rules are nevertheless united in their desire to prevent the development of gambling regarded as illegal and to channel demand towards legal provision. Cooperation in seeking common methods of identifying and combating illegal gambling would thus seem useful. The differences between what precisely is intended by authorised operator in the different Member States must be disregarded in this discussion, given that every Member State is free to set its own level of regulation in compliance with Community law. 28. The following instruments have been considered in a number of Member States: penalties against unauthorised operators and advertising of their sites, obligation to provide information when unauthorised sites are accessed (or even filtering) or blocking financial transactions with the operators concerned. Given the different levels of protection in the Member States, the discussions could initially focus on the conditions under which such tools could be used. Cooperation between the relevant national authorities would also help to make those tools more effective, particularly if there were shared lists of operators (authorised or, conversely, prohibited) for the use of said authorities. 29. The Presidency believes that the Council bodies competent to discuss police cooperation matters could also consider more specific cooperation between the services responsible for combating illegal websites. This cooperation could take the form of information exchange and concerted action on controls. Taxation 30. Tax issues could also be raised in due course in the ECOFIN Council’s subordinate bodies. This is an important dimension of gambling policy which, following the development of online gambling, raises specific questions. The Presidency considers that those bodies could, inter alia, look into the question of the place of taxation with the aim of ending double taxation, possibly by taxing gambling operations at the place of consumption.

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IV. POSSIBLE FUTURE PROCEEDINGS 31. The discussions and issues identified provide ample food for detailed thought and discussion within the Council. This will first of all require continued information and experiences sharing and seeking of synergies between national authorities. Detailed knowledge of the different national regulatory and control arrangements is a necessary prelude to joint discussion and to the development of increased cooperation between the Member States, for example concerning the best responses to the challenges raised by unauthorised operators. 32. The Presidency also considers that, with due regard for the competences of each European Union institution, there are already grounds for seeking common approaches in certain areas. There could be discussion of instruments that could deliver in terms of policy objectives, such as the protection of minors, controls on the size of amounts bet and transactions and advertising or even combating money laundering. They could in due course lead to discussion of the usefulness of policy tools, be that legislative or non legislative instruments. 33. For a successful outcome of the Council’s proceedings, and to take due account of the public policies issues identified in the present report, an active participation of the Commission is important. Discussions conducted within the Council and in the other European Union institutions will call for the Commission to conduct detailed studies and consultations and possibly in due course make proposals to identify ways forward.

V. CONCLUSION 34. Given the delegations’ substantial and constructive exchanges in the Working Party on Establishment and Services, the Presidency considers that discussions should continue on the issues detailed above. 35. The Competitiveness Council is invited to: – Take note of this progress report of the Presidency;

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– Instruct its preparatory bodies to continue discussions on these issues.



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ANNEX

SUMMARY OF DELEGATIONS’ REPLIES TO THE QUESTIONNAIRE General remarks 1. Almost all the delegations replied, often at some length, to the questionnaire from the Presidency.7 The purpose of the questionnaire was to provide delegations with an overview of the legal framework and the policies on gambling and betting in all the Member States. It therefore supplements information already available.8 2. By way of introduction, it should be noted that although most of the various types of gambling exist in all the Member States, definitions may vary. In particular, in some Member States gambling and betting are two distinct concepts that are sometimes even mutually exclusive, whereas in others betting is a form of gambling. While more in-depth discussions on the subject could clarify matters, the Presidency wishes at this stage to opt for the broadest definition and focus on gambling and betting as a whole. 3. In addition, more than a third of Member States stated that they had undertaken or were contemplating substantial reform of their national legislation, partly to take account of the development of Internet gambling and to strengthen controls (Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Estonia, Finland, France, Hungary, Ireland, Lithuania, Poland, Romania, Sweden). Other Member States have recently carried out a reform (Germany, Italy, Latvia, United Kingdom and, in 2002, Malta). Organisation of the gambling and betting sector 4. For moral, philosophical and cultural reasons in particular, Member States have developed their own organisational models for the gambling and betting sector. They have introduced a variety of rules depending on the forms of authorised gambling and betting, as well as with regard to market structures and authorised operators.

7 This summary is based on the 26 contributions received from all Member States except Spain. It takes no account of some specific local arrangements. 8 Cf. in particular the report of the Swiss Institute of Comparative Law, Study of Gambling Services in the Internal Market of the European Union, Final Report, 14 June 2006. 303

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Forms of authorised gambling and betting 5. All Member States have specific legislation dealing with gambling and betting. In this framework several prohibit gambling and betting as a general principle, subject to authorisation being granted (Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovakia, United Kingdom). Conversely, in other Member States such prohibition principle does not apply. 6. The heaviest restrictions are on casinos and automatic gaming machines, such as slot machines. These activities are sometimes prohibited (casinos in Cyprus and Ireland; slot machines outside casinos in Estonia, Greece, France, Luxembourg and Portugal). The setting up of both casinos and, to a lesser extent, of automatic gaming machines, is mostly subject to specific rules aimed at limiting their number. 7. All Member States permit at least some forms of betting. However, there are often specific restrictions depending on the conditions or the purpose of the betting. While some Member States permit the placing of bets on any kind of event from the point at which no participant can influence the outcome, several only permit betting on sporting events (Austria, Belgium, Germany, Estonia, France, Hungary, Luxembourg, the Netherlands and Portugal) or even only on the results of these competitions for some of them. Furthermore, live betting is prohibited in six Member States (Belgium, Germany, France, Hungary, the Netherlands and Portugal). These rules also apply to betting on horse racing, subject to certain reservations; four Member States permit only the organisation of pari-mutuel betting (Greece, France, the Netherlands and Portugal). 8. Lotteries exist in all Member States. On the other hand, almost half of them (Czech Republic, Denmark, Finland, Hungary, Ireland, Italy, Latvia, Malta, The Netherlands, Poland, Portugal, Sweden, United Kingdom) have specific legal arrangements authorising and regulating bingo. 9. Forms of gambling and betting that are permitted in the various Member States are also mostly permitted on line. In general, the authorisations, licences or concessions granted apply to all gambling, real and remote. However, several Member States have established a general prohibition principle for Internet gambling (Cyprus, Germany, Estonia, Greece, The Netherlands, Poland9), whereas others impose specific restrictions on Internet gambling, prohibiting in particular on-line casino and slot machine gambling (Belgium, France, Finland, Hungary,

9 Where, according to the regulations applying to games and mutual wagering, such games may be organised only in games salons, mutual wagering points and slot machine games with low price points. 304



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Lithuania, Portugal, Slovakia). One Member State issues licences specifically intended for the provision of those services via Internet. Market structure and authorised operators 10. In the overwhelming majority of cases, the rules laid down regarding market structure differ depending on the forms of gambling authorised. Only three Member States have the same rules governing all aspects of gambling (Latvia, Malta and Romania). 11. As regards lotteries, almost two-thirds of the Member States have established monopolies or exclusive rights that are awarded to public operators or private operators who are non-profit-making or under the direct supervision of a public authority. In most cases, these arrangements do not exclude the existence of specific rules on local and traditional lotteries. Where lotteries forms a market segment open to competition, that segment is subject to similar licensing and regulation rules that govern betting, or even casino and slot machine gambling (Austria, Cyprus, Czech Republic, Italy, Lithuania, Latvia, Malta, Romania, United Kingdom). 12. Wider divergences between Member States are seen in sports betting and betting on horseracing. In over half of the Member States, this segment is open to competition (Austria, Belgium, Cyprus (except betting on horse racing), Czech Republic, Germany (except sports betting), Estonia, Hungary (except for pari-mutuel sports betting), Ireland (except for on-course Tote betting), Italy, Lithuania, Luxembourg, Latvia, Malta, Poland, Romania, Slovakia, United Kingdom). Operators must obtain a licence, concession or agreement in advance and for that purpose are subject in most of the Member States concerned to controls aimed at guaranteeing their good repute and even their financial viability. Operators awarded sole rights are bodies subject to State supervision and/or are non-profit-making. 13. Casinos, where they are not prohibited, are in most cases subject to restrictive rules, involving either a numerus clausus or restrictions on establishment (population thresholds, specific urban situation). In most Member States prior authorisation from a national or local administrative authority must be obtained in order to open a casino. In seven Member States only a public operator or one closely supervised by the State can manage a casino (Germany, Greece, Finland, Hungary, the Netherlands, Sweden, Slovenia). 14. Offering other games of chance, in particular slot machines, outside casinos, is the most common option (except in Greece, France, Luxembourg and Portugal). As a general rule, this gambling requires a licence or authorisation. However, the applicable rules turn out to be more flexible than those governing casinos, given in particular the lower stakes involved. 305

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Regulation of the gambling and betting sector 15. While gambling and betting in all the Member States is governed by a specific regulatory framework, this varies according in particular to national traditions, the degree of openness of the sector or the rules on operators’ access to the market. 16. Specific independent regulatory bodies have sometimes been set up. Four Member States have one or more independent authorities (Belgium (except for the national lottery), Lithuania, Malta, United Kingdom). These bodies are responsible for examining and awarding licences to operators, supervising compliance and, where necessary, initiating the appropriate procedures when the obligations imposed are breached (administrative penalties extending to withdrawal of the licence, referral to the judicial authorities). 17. In the other Member States one or more ministers are responsible for the regulation or supervision of the sector, together with the State’s judicial authorities and the police. This responsibility lies mostly with finance minister, but, depending on the case, it may be the sole or additional responsibility of the justice, interior, agriculture, economy or social affairs ministers. Nine Member States have a structure specifically dedicated to gambling within the ministries responsible (Bulgaria, Denmark, Greece, Italy, Latvia, the Netherlands, Romania, Sweden and Slovenia). In addition, the activities of operators in those States who enjoy sole rights are generally subject to close supervision by the administrative authority. 18. In a number of Member States the local authorities also have powers as regards, in particular, casinos and slot machines installed outside casinos. They are usually responsible for issuing authorisations and licences or are consulted before the latter are issued. Cross-border gambling and betting 19. In order to monitor activities on their national territory, Member States have sometimes imposed specific restrictions on the cross-border gambling and betting operations of operators to whom they issue authorisations, licences or concessions. Two Member States explicitly stipulate that the authorisations, licences and concessions granted are valid only on their national territory (Austria, Germany). In most cases, however, there is no such explicit rule. Authorised operators may therefore offer gambling and betting in other Member States provided that the State in which they are established does not pose obstacles by virtue of its supervisory role. Furthermore, a cooperation agreement has been concluded between two Member States (Greece and Cyprus) allowing under certain conditions nationals of the latter to participate in real gambling activities provided by operators of the former.

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20. As regards the possibility of a provider established in the European Union or the European Economic Area offering gambling operations on the territory of another Member State, the situation differs depending on the way the sector is organised. In Member States that have awarded a monopoly or sole rights, the latter are seen as an obstacle to competition from a provider established in another Member State. On the other hand, where a Member State allows several operators to carry out their activities provided they have a licence or authorisation, operators from another Member State are generally allowed to apply for a licence or authorisation to be granted. Objectives of gambling policies and implementation instruments 21. All Member States recognise the distinctive nature of gambling and betting on account in particular of the associated risks. They therefore take particular care to ensure that such activities are compatible with the preservation of public and social order and consumer protection. Protection of public order 22. Combating crime, fraud and money laundering is a priority for all Member States. They apply a range of common international or European Community rules in this regard. 23. Some Member States have gone further and laid down specific rules and arrangements: extending obligations under the Directive on money laundering beyond casinos (Greece, France, Italy, Malta, Slovenia) or tightening the rules on the compulsory declaration of transactions exceeding a certain amount (Austria, Belgium, France, Lithuania, Poland, Portugal); specific obligations to communicate to the administrative authority information on transactions conducted (Czech Republic, Latvia, Malta, Slovenia, United Kingdom), allowing real-time supervision (Finland, Italy, Malta). 24. In order to prevent fraud, many Member States also prohibit the organisers of sporting events from having any involvement in the placing of bets (Bulgaria, Germany, Estonia, Greece, France, Hungary, Italy, Latvia, Portugal, Romania, Slovenia). Protection of social order 25. The risks of gambling addiction make the protection of social order a major objective throughout the European Union. Special attention is paid to the most vulnerable groups. For example, all Member States prohibit access by minors to some or all forms of gambling, in particular the most addictive (casinos, slot machines). Some Member States extend this protection to vulnerable people (Austria, Belgium, Bulgaria, France, Malta, the Netherlands, Portugal, Slovenia, 307

In the Shadow of Luxembourg: EU and National Developments in the Regulation of Gambling

United Kingdom), e.g. by drawing up a list of people banned from gambling. A person may be placed on this list compulsorily or at his or her own request. This goes hand in hand with an obligation to check the identity of gamblers when they enter casinos and gaming halls (Austria, Belgium, Bulgaria, Czech Republic, Germany (for casinos), Denmark, France, Italy, Lithuania (for casinos), Latvia, Malta, The Netherlands, Poland (for casinos), Portugal, Sweden, Slovenia, United Kingdom). 26. The following measures have also been implemented: demarcation of zones in which gambling is banned, e.g. near schools (Austria, Belgium, Lithuania, Poland, Portugal); restriction on the size of the stake or the winnings (Austria, Belgium, Germany, Denmark, Greece, Finland, France, Hungary, Italy, the Netherlands, Poland, Sweden, Slovenia, United Kingdom); prohibition on credit gambling (Belgium, Estonia, Greece, Finland, France, Lithuania, Portugal). 27. Particular attention is also paid to publicity. A majority of Member States have drawn up specific rules limiting publicity as regards gambling and/or making it mandatory to inform people of its dangers (Belgium, Bulgaria, Czech Republic, Germany, Denmark, Estonia, France, Hungary, Ireland, Lithuania, Latvia, Poland, Portugal, Sweden) or are contemplating such rules (Finland). In other Member States these restrictions stem from codes of conduct (Austria, Malta, the Netherlands, Portugal, United Kingdom). Consumer protection 28. In order to protect consumers, Member States have drawn up rules for maintaining the trustworthy gambling operators and operations of operators. Besides the relevant Community provisions, more specific arrangements have been put in place: owners of private undertakings applying for a licence or authorisation are identified and/or checked (Austria, Belgium, Germany, Denmark, Estonia, France, Ireland, Italy, Lithuania, Latvia, Malta, Poland, Portugal, Slovenia, United Kingdom); the managers and/or the staff of gaming establishments are issued with an authorisation (Austria, Belgium, Greece, France, Lithuania, Malta, Portugal, Slovenia, United Kingdom); checks on gaming equipment (Belgium, Bulgaria, Germany, Denmark, Greece, France, Malta, the Netherlands, Poland, Portugal, Slovenia, United Kingdom). 29. In addition, the player return rate is closely controlled in most Member States in order to protect gamblers from over-attraction to gambling (France) or to guarantee them a fair return in relation to their outlay (Belgium, Bulgaria, Germany, Denmark, Finland, Hungary, Italy, Lithuania, Luxembourg, the Netherlands, Poland, Portugal, Sweden, Slovenia).

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Financing activities in the public interest and taxation 30. In almost all Member States a substantial part of the profits from gambling and betting, or even all, is allocated directly or via the State budget to certain activities in light of the general interest objectives involved. In relation to the total outlay, the amounts involved can turn out to be quite considerable; they generally represent 10% of gross gambling profits,10 or even, in some Member States and for gambling either wholly or in part, 10% or more of the amounts bet (Belgium, Bulgaria, Germany, Denmark, Finland, the Netherlands, Poland, Portugal). 31. National moral, philosophical and cultural traditions determine how this money is ultimately spent. The fact is, however, that in the great majority of Member States it is by and large social, charitable or humanitarian works that benefit from these transfers. Furthermore, legislation in several countries provides for some of the money from, in particular, betting on sporting events and horse racing to be ploughed back into sports and equine organisations (Austria, Belgium, Bulgaria, Cyprus, Germany, Denmark, Greece, Finland, France, Ireland, Italy, Poland, Portugal, Romania, Sweden, Slovenia, United Kingdom). In other Member States, this money can go towards cultural or educational projects (Belgium, Bulgaria, Germany, Denmark, Greece, Finland, France, Italy, Poland, United Kingdom) or tourism (Slovenia). 32. As regards taxation,11 gambling and betting are generally subject to specific tax rules. Nevertheless, few Member States apply an identical rate throughout the sector (Latvia, The Netherlands). Where different rates are provided for, these differ according to the type of gambling or betting. Whether the gambling is on line or not does not seem to be taken into account in most cases. 33. It is mostly gross gambling profit or the amount of money bet that is subject to tax. While a flat rate is most frequently applied, several Member States have progressive rates. Also, operators in many Member States may be subject to market access rights linked to the granting of a licence or authorisation (Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Lithuania, Latvia, Malta, the Netherlands, Romania, Slovenia, United Kingdom).

10 The total amount of gross gambling profit throughout the European Union in 2003 was put at 51.5 billion euros (source: report by the Swiss Institute of Comparative Law cited above). 11 Several Member States regarded this matter as being within the remit of the Ecofin Council and refused to reply. 309

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Action to combat illegal gambling 34. Action to combat illegal gambling, real and remote, is a task of the police or, where appropriate, specialised services in all Member States. In the event of non-compliance with requirements imposed on them, authorised operators are generally liable to administrative penalties. Criminal sanctions are also laid down in many Member States, in particular to prevent unauthorised operators carrying out their activities on national territory. 35. In several Member States, especially those which prohibit on-line gambling or impose special provisions governing access to their market, action to combat gambling considered illegal on the Internet is now an important challenge. New instruments involving Internet service providers and financial institutions have been mentioned. 36. As regards financial institutions, some Member States have decided to make it obligatory to block bank transactions with unauthorised sites, or are contemplating such a measure (Belgium, Germany, Estonia, Finland, France, Lithuania, the Netherlands). 37. Internet service providers likewise are involved or might be involved once the discussions underway are concluded. The following measures are envisaged: mandatory information of users connecting to an illegal site (Belgium, Estonia, France, the Netherlands); blocking access to these sites (Germany, Estonia, Finland, Italy).

310

Index Addiction,  36, 44, 46, 51, 59, 62-66, 70, 77, 81, 85, 89, 107, 109, 115, 167, 169, 175, 181, 183, 192, 200-203, 205-206, 211, 216, 218, 224, 227, 231, 233, 236, 239, 244, 247, 249, 253, 257 see also ‘problem gambling’ Amusement arcade,  81, 121, 123, 140, 142, 144, 148, 151, 195-197, 200, 203-206, 210, 214, 216-217 see also ‘gaming machines’ and ‘slot machines’ Bingo  80, 121, 123-124, 128, 137-141, 143, 147-149, 154, 193-194 Casino  1, 7, 18, 36, 48, 58-59, 61-62, 80-83, 112-113, 120-121, 123-125, 127-128, 132-133, 136, 139-143, 145, 147-148, 150, 153-156, 160, 164, 166-167, 184-186, 191-192, 195-196, 200-201, 203-205, 209-210, 213-214, 216-217, 220, 222, 226, 237, 246, 252 Chance,  26, 84, 122, 138-139, 148, 197, 199, 216, 238-240 see also ‘skill’  Channelling  9, 31, 36, 45-46, 58, 64, 73, 110-111, 119, 154, 159, 164, 167, 177, 182, 188, 193, 197-198, 225-229, 234 Charity lotteries  153 Children,  125, 134, 137, 140, 149-151, 181 see also ‘minors’ and ‘vulnerable persons’ Concession  40, 58-60, 62 ,64, 90, 109, 222, 228 Consistent and systematic,  21, 25, 31, 44-46, 51-54, 59, 61, 63, 89, 92, 97, 99, 102, 108, 176, 182, 204, 228-229, 232, 254 see also ‘proportionality’ Consumer protection  11, 29, 37, 61, 77, 88-89, 105, 107, 134, 137, 147, 169, 171, 174-175, 180-181, 203, 227, 255 Country of origin principle  32, 53, 110, 112, 135, 170, 172, 174, 187, 214 Crime, combating of   2, 24, 35-36, 51, 56-57, 59, 64-65, 77, 89, 93, 109, 177, 200-202, 204, 218 Culture  5, 15, 31, 84-85, 88, 117, 122, 191, 202, 209, 220, 226-227, 255-257 De Lotto (Netherlands)  39, 42-43, 45, 47-48, 210-212, 214-215 Double regulatory burden  25, 32, 42, 65, 71, 177, 181, 187-189 311

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Equivalence, of regulatory regimes and standards  22-27, 69, 231, 256 Establishment, freedom of   16-18, 20, 24, 28, 41, 52, 59-60, 64, 90, 109, 175, 185, 188, 225, 253, 255 Establishment, requirement to be  164, 185, 187 European case-law C-6/01, Anomar  16, 88-89, 107, 176, 226, 254 C-203/08, Betfair  18-19, 22, 27, 38-39, 41, 45-46, 73, 96-97,100101, 106, 115, 136, 211-212 C-46/08, Carmen Media  2, 18, 25, 27, 36-37, 44, 62-63, 67, 69-73, 98, 106, 116, 205, 219 C-243/01, Gambelli  16, 21-22, 24-25, 34, 37, 45-46, 51, 54, 60, 88-92, 95, 100, 107-108, 136, 175-177, 180-182, 186-187, 203-204, 228-229, 232, 254 C-124/97, Läärä  16, 29, 37, 46, 68, 88-89, 91, 93-95, 106-107, 175-176, 203, 226, 254 C-258/08, Ladbrokes  18-19, 27, 38, 41, 44, 46-48, 50, 64, 73, 9497, 100-101, 106, 110-111, 115, 136, 177-179, 182, 211-212 C-42/02, Lindman  16, 66, 93, 108, 176-177 C-316/07, Markus Stoß  2, 15, 18-19, 22, 27, 37, 62-64, 66-70, 72-73, 106, 116, 205, 214 C-338/04, Placanica  16, 22, 31, 37, 45-46, 61, 64, 88, 90-91, 93, 95, 100, 106, 108-109, 171, 175-178, 180-183, 186, 211, 228-229, 232, 254 C-42/07, Santa Casa da Misericórdia  2-3, 9-10, 11, 17, 19, 22, 27-29, 31-34, 36, 42-43, 56-57, 72-74, 85, 87-89, 91-97, 99-101, 103, 106, 111, 168, 175, 178-179, 181-183, 185-187, 213, 219, 231-234, 254, 257 C-275/92, Schindler  26, 29-30, 37, 42, 65, 87-90, 94-95, 106-107, 168, 176-178, 183, 203, 211, 225, 227, 241, 254 C-447/08 & C-448/08, Sjoberg and Gerdin  19, 27, 54-56, 97, 106 C-409/06, Winner Wetten  19, 27, 44, 50-55, 63, 70, 97, 106, 205 C-67/98, Zenatti  16, 21, 29, 37, 46, 88-89, 106-108, 175-176, 182, 203, 254 European Council  1-2, 11, 13, 105, 117, 170, 214, 251, 259 European Parliament  1-3, 13, 75-76, 106, 114-115, 117, 169, 214, 227 European secondary legislation Audiovisual Media Services Directive (2007/65)  20, 113, 135, 170, 172-174, 227, 253 E-Commerce Directive (2000/31)  20, 27-28, 57, 68-69, 112-113, 170, 172, 227, 253 Information Society Directive (1998/48)  163, 171

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Services Directive (2006/123)  20, 27-28, 57, 68-69, 112-113, 170, 172, 227, 253 Television Without Frontiers Directive, (TWF Directive) (1989/552)  113, 172 Exclusive rights,  28, 42, 45-46, 48, 56-57, 73, 87, 107, 111, 226 see also ‘monopoly’ Française des Jeux (FDJ) (France)  221-225, 237, 239 Fraud  2, 7, 10-11, 13, 24, 31, 33-34, 46, 54, 56-57, 61, 64, 77, 85, 8890, 92-96, 107, 111, 115, 134, 175, 178, 181-184, 186, 188, 204, 218, 224-227, 229, 230, 232, 234-235, 246, 253-254, 257-258 Free play games,  9, 12, 239 see also ‘promotional games’ Gaming machines,  3, 78, 80, 109, 121, 123-124, 126, 128, 133, 137, 142, 144-146  see also ‘amusement arcade’ and ‘slot machines’  Good causes  44, 57, 64, 209, 211-212, 214-216 Goods, free movement of   17, 22-24, 170, 180 Harmonisation  11-12, 25, 32, 34, 68, 84, 92, 98, 100-101, 103, 106, 111, 170-172, 178, 180, 212, 227, 251, 255, 258 Holland Casino (Netherlands)  209-210, 213-214, 216 Horserace betting  38, 48, 55, 63, 90, 120, 154, 158, 196-197, 199-201, 205, 223, 238 Illegal gambling  46, 118, 145, 158, 165-167, 199, 237, 256 Infringement proceeding  75, 169, 171 Internet gambling,  27, 32, 36, 72, 73, 80, 192, 198, 202, 206, 213, 217, 237, 249 see also ‘online gambling’ and ‘remote gambling’ Licence,  10, 22-24, 26, 28, 32-33, 36, 38-43, 45-46, 48-50, 55, 63, 67, 69-72, 80, 82-83, 91-92, 95-102, 107, 109-110, 116, 119, 122-134, 136, 139-141, 143, 145, 147-148, 150, 154-156, 159-166, 168, 172-174, 177-180, 182-189, 199, 206-207, 209, 228, 230-231, 233, 235, 238, 245, 247, 252, 254 see also ‘permit’ Lottery  11, 27, 29-30, 35-37, 43, 55, 58, 63-65, 70, 82-83, 87, 108-109, 112, 117-121, 123-124, 126, 132, 134, 136-139, 143, 149-150, 154-155, 159, 178, 182, 188, 191-196, 199-201, 204, 206, 209210, 212, 214-217, 220-222, 224-228, 233, 237, 243, 245-246, 252

313

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Margin of discretion  18, 22, 27, 29-31, 33-34, 37, 41-42, 49-50, 52, 54, 60, 68, 73-74, 87-89, 91, 94-95, 97, 102, 176, 226-227, 232, 253254, 256 Minors,  81, 84, 119, 153, 156, 161, 198, 225, 233, 239 see also ‘children’ and ‘vulnerable persons’ Money laundering  13, 35, 59, 80, 85, 118, 125, 145, 224, 234, 256. Monopoly  9-10, 12, 16, 27-29, 31-34, 42-43, 45, 51, 61-73, 91, 93-95, 100, 102, 106-107, 109-110, 155, 177-179, 186, 200, 203, 206, 210, 212, 219, 222-226, 229-233, 239, 254 see also ‘exclusive rights’  Morality  8, 10, 31, 83-84, 107, 226, 255-256 Mutual recognition  13, 15, 19-20, 22, 25, 32, 34, 67-71, 74, 91-92, 94-96, 98-99, 101-102, 106, 111-112, 168, 177-181, 186-187, 189, 229-232, 235, 254, 256 National authorities ARJEL (Autorité administrative indépendante de regulation des jeux en ligne) (France)  234-236, 245-247, 249 DCMS (Department of Culture Media and Sport) (UK)  122, 131-132, 135-136, 143-144, 147, 151 Gaming Commission (Kansspelcommissie) (Belgium)  2, 5, 7-8, 10, 75, 154-155, 157-159, 165-167, 173, 187-188, 251, 256 Gambling Commission (UK)  38, 119-123, 128, 130, 132, 137, 144, 151 NLC (National Lottery Commission) (UK)  119, 150 National legislation Gambling Act 2005 (UK)  19, 22, 119, 123-124, 130, 137, 252 Interstate Treaty on Gambling (Germany)  51, 63, 192, 195-203, 205-206, 252 Law no. 2010-476 of 12 May dealing with the opening to competition and regulation of the online gambling sector (France)  238 Loi du 21 mai 1836 portant prohibition des loteries (France)  220 Loi du 2 juin 1891 qui interdit les paris sur les courses de chevaux et de lévriers (France)  220  Loi du 15 juin 1907 autorise les casino dans les stations thermales, balnéaires et climatiques (France)  220 Wet op de Kansspelen (Netherlands)  38-39, 45, 47-48, 210 Wet van 7 mei 1999 op de kansspelen, de weddenschappen, de kansspelinrichtingen en de bescherming van de spelers (Belgium)  165 National Lottery (UK)  58, 119-121, 134, 136, 150, 154 Necessity,  9, 21, 24, 32-34, 93-95, 184, 231-232, 254 see also ‘proportionality’ and ‘suitability’ 314



Index

Online gambling,  3, 11, 19, 31, 33, 80, 82-83, 105, 112, 115, 153, 156, 158, 164, 167, 169, 171, 179, 184, 185-187, 189, 201, 219, 227228, 230-233, 235, 237-239, 245, 247, 252, 255, 257-258 see also ‘internet gambling’ and‘remote gambling’ Pari mutuel hippodrome (PMH) (France)  223 Pari mutuel urbain (PMU) (France)  162, 221, 223-224, 229, 234, 237, 239, 246 Permit,  197, 210-213, 216-217 see also ‘licence’ Poker  78, 82, 160, 164, 195, 197, 202, 204, 213, 231, 237-239, 252 Precautionary principle  115, 232, 257 Preliminary reference  15, 35, 37-38, 45, 51, 54, 58, 62, 73, 75, 204 Problem gambling,  77-79, 81, 119-120, 143 see also ‘addiction’  Promotional games,  112, 211, 214  see also ‘free play games’ Proportionality, test of,  15, 19-20, 25, 30-31, 40, 42, 45, 55-56, 59-60, 62, 64, 66, 73, 88-92, 94-95, 97, 101, 103, 106-110, 112, 130, 134, 174-179, 181, 183-186, 188-189, 227-229, 231-232, 235, 247-248, 253-255 see also ‘necessity’ and ‘suitability’ Public policy  2, 7, 11, 17, 35-36, 174, 253, 257 ‘Race to the bottom’  26, 180 Remote gambling,  69, 111, 114, 116, 119, 121, 123, 125, 132, 134-136, 149 see also ‘internet gambling’ and ‘online gambling’ Responsible gambling  79, 81, 151-152, 223, 256 Revenue  29, 37, 44, 55, 57-59, 61, 64-65, 81, 89, 109, 175, 182, 192, 198, 220, 224 Scientific Games Racing (SGR) (Netherlands)  39, 42-43, 45, 48, 210 Services, free movement of,  16-18, 20-21, 24-25, 28, 33, 40-41, 52-53, 59, 62, 70, 88, 90-91, 96-98, 101, 108-109, 168, 170, 175, 180181, 184-185, 188, 211, 225-227, 229-230, 232, 235, 253, 255 Skill,  148, 197, 199-201, 210, 234, 238-239 see also ‘chance’ Slot machines,  80-83, 120, 191, 195, 201-203, 205, 220, 237, 239 see also ‘amusement arcade’ and ‘gaming machines’ Social costs  105 Social responsibility  120, 127, 132, 145

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Sports-betting  24-26, 28, 38, 43, 45, 47-48, 51-55, 62-65, 67, 69-70, 154, 158, 178, 191-192, 196-197, 199-200, 202, 204-206, 212, 217, 221-222, 225, 235 Staatsloterij (Netherlands)  208 Subsidiarity, principle of   77, 251 Suitability,  21, 31, 40, 46, 53, 56, 66, 93, 176 see also ‘necessity’ and ‘proportionality’ Taxation  7, 10, 26, 35-36, 44, 58, 61, 64-65, 70, 71, 108, 114, 116, 117, 135-136, 154, 156, 175, 182, 214, 224, 231, 234-235, 257 Treaty of Lisbon  5-6, 16 Vulnerable persons,  11-12, 77, 81, 84, 125, 149, 159, 173, 181-183, 188 see also ‘children’ and ‘minors’

316