The barrage continues
The movement towards regulation of gambling markets across national frontiers in Europe continues.
At the time of writing, Germany is the latest European country to open a licensing procedure, with developments expected imminently in Portugal and over the next 18 months or so in the UK. It is clear that individual states within the European Union are able to regulate the provision of gambling services on their territory, both bricks and mortar and remote. Boundaries to this exercise of authority are now also becoming increasingly clear.
Perhaps surprisingly for some, a dose of clarity is being provided by the conspicuous number of rulings connected with the gaming and gambling industries delivered by the Court of Justice of the European Union (CJEU) this year. According to the CJEU’s online case law database, of the 32 rulings or orders delivered by the CJEU this year (until the time of writing) just over one third directly concerned gaming and gambling.
It is also worth noting that Commissioner Barnier’s announcement at the European Parliament on June 27, 2012, that the Commission intends reactivating infringement proceedings against those Member States the gambling laws of which are in violation of EU law may indicate that the European Commission is once again politically able to enforce the EU laws in this sector.
Replying to a parliamentary question by MEP Creutzmann, Commissioner Barnier confirmed on April 27, 2012, that there were nine infringement proceedings pending against nine Member States as well as 28 complaints registered with the Commission relating to 12 Member States.
In this article we go through some of the main rulings of the CJEU this year, all of which result from requests for a preliminary ruling by the CJEU from a Member State’s court.
The Costa and Cifone ruling and a host of other orders delivered by the CJEU were a consequence of Italy’s failure to effectively resolve the state of illegality created by Italian legislation, which discriminated against newcomers to the market. Messrs Costa and Cifone both ran betting shops affiliated with Stanleybet.
In 2006, Italian law was amended through the so-called Bersani decree which, among other things, provided the basis for several new licences for betting shops to be issued. It was incumbent on Stanleybet to obtain a licence but it was unable to do so; under the terms of a the licence agreement which it would have had to sign to obtain a licence it risked losing its licence immediately due to pending criminal proceedings against certain other of its agents: Messrs Placanica and others. The deadline for tenders for one of the new licences fell due on October 20, 2006. The CJEU ruled in the Placanica and others case, in effect absolving those persons and Stanley from any criminal responsibility, on March 6, 2007.
In Costa and Cifone the CJEU essentially ruled that the amendments introduced by the Bersani decree were themselves ineffective in remedying the discriminatory treatment of newcomers to the Italian market insofar as they introduced new requirements which themselves put new entrants at a disadvantage.
Moreover, the CJEU reiterated that a Member State cannot rely on the objective of reducing betting and gaming opportunities to justify restrictive measures when on the other it had embraced a policy of expanding the gaming and gambling sector with a view to increasing tax revenues.
The CJEU held that all conditions of the licence award and procedure must be clear, precise and unequivocal. It found that certain provisions of the proposed licence agreement lacked clarity. Also, and very importantly, it clarified that any sanctions imposed on an operator must not go beyond what is necessary to attain the objective pursued and specifically that “exclusion from the market through withdrawal of the licence should in principle be regarded as proportionate only if it is based on a judgement which has the force of res judicata and concerns a sufficiently serious offence.”
In Hit and Hit Larix, the CJEU ruled that a Member State cannot prohibit advertising of gambling by a licensee of another Member State simply because the consumer protection requirements in that member state are not identical to the target Member State’s domestic rules.
A Member State is permitted to ban cross-border casino advertising on the grounds of consumer protection only when it can ascertain that the gambling laws of the Member State where an operator seeking to advertise is licensed do not effectively guarantee the same levels of protection as its own. Additionally, the Member State imposing the ban must ensure that its own rules are proportionate.
The Slovenian casino entertainment group Hit had brought an action against the Austrian Ministry of Finance after the latter refused to issue the permits which Hit had applied for in order to be able to advertise their Slovenian licensed casinos in Austria.
Hit argued that the decision of the Ministry was in breach of the right to freely provide services which is enjoyed by them under European Union law. The Ministry contended that it was its obligation to protect customers in its territory from being encouraged to visit casinos in other Member States with lower standards of protection when compared to Austria.
The CJEU’s preliminary ruling in joined cases Fortuna, Grand and Forta concerned Poland's failure to notify its Gambling Act 2010 to the European Commission as required under Directive 98/34/EC. Under this directive a “technical regulation” is notifiable by the European Commission to a Member State on pain of that technical regulation not being enforceable against third parties.
Poland’s new law on games of chance came into force on January 1, 2010, and introduced a prohibition on the operation of new gaming machines outside of casinos as well as a transitional period to phase out existing machines. The request for a reference to the CJEU came about following the Polish authorities’ refusal to amend, extend or issue authorisations under an older law for low-prize machines outside casinos.
The CJEU held that a technical regulation includes a legislative provision which “could have the effect” of limiting or making impossible gaming on low-prize machines other than in casinos and gaming arcades. It follows that a measure which imposes conditions that could significantly influence the nature and marketing of low-price gaming machines is a technical regulation and, as such, is notifiable by a Member State to the European Commission under Directive 98/34/EC. It is clear from the CJEU’s ruling in this case that the obligation to notify cannot be derogated from by a Member State other than as set out in the directive. The language used by the CJEU in this ruling seems to seriously question Poland’s commitment to respecting its obligations under this bit of EU law in the area of gaming and gambling.
Importantly, this ruling reaffirms that even in the area of gaming and gambling the CJEU is not prepared to give excessive discretion to Member States to determine what is or is not a “technical regulation” notifiable under Directive 98/34/EC. In Garkalns SIA vs Rīgas dome the margin of discretion of Latvian authorities in determining whether to grant an amusement arcade permit inside a shopping centre in Riga was the subject of the reference to the CJEU. An application for an amusement arcade permit was refused to Garkalns SIA on the basis of a statutory provision which allowed the relevant authority to do so if it considered that granting the permit would cause “substantial impairment of the interest of the state and of the residents of the administrative area concerned.”
The CJEU confirmed that the protection of the interests of local residents and consumers against risks linked to betting and gaming could constitute an overriding reason in the public interest capable of justifying a restriction on the freedom to provide services. However, it clearly drew the attention of the referring court to the fact that decisions made relying on such a wide margin of discretion as granted by Latvian law to local authorities when determining an application for gaming premises can only be valid if they are (i) transparent; (ii) based on objective and non-discriminative criteria which are known in advance; (iii) consistent and systematic; and (iv) the reasoning for such decisions is made public.
All of these cases somehow concerned bricks and mortar gaming or gambling venues, but these CJEU rulings contain principles which in our view apply across the board both to land-based as well as to remote gaming and gambling operations within the European Union.
It will be interesting to see whether Member States in the process of reforming their gambling laws will take note of these rulings and take heed of these principles when adopting and implementing their laws. The same applies to those Member States which the European Commission considers to be recalcitrant. Was Commissioner Barnier’s address to the European Parliament meant to put them on notice?
About the author… James Scicluna is a co-founder of WH Partners. He is a dual-qualified Solicitor of the Supreme Court of England and Wales and Malta Advocate. James holds degrees from University College London and the University of Malta. He can be contacted on [email protected].
This feature can be read in the Autumn issue of European Gaming Lawyer magazine.
