Responsibility and Restrictions
Legislative developments in the online gaming market in the European Union continue to be characterized by the widely varying gaming policies of individual member states. An increasing number of EU countries are realizing that entertainment in the form of online gaming is enjoying growing popularity, making regulation of the online gaming market essential. For many years now, the United Kingdom and Italy have been examples of countries that have regulated their online gaming markets to the benefit of consumers, sports and government revenues. Only recently, Italy extended its online licences to poker tournaments and announced that it will be granting further online licences. Even France and Spain plan to allow private operators access to their markets under stringent conditions and controls.
However, a number of member states are still pursuing a policy of maintaining a state monopoly of internet gaming, or even a complete ban. This results in considerable legal uncertainty, numerous court cases, and a vast grey or black market on the internet. As a consequence, in the absence of government control and uniform standards, the consumer is often exposed to unregulated and dubious product offerings. Austria, Holland, Norway and Finland, for example, are planning a variety of measures designed to keep competitors out of their markets.
In the autumn of 2008, the Austrian Government published a draft bill designed to tighten the penal provisions of the Gambling Act and penalize the handling of financial transactions for EU-licensed gaming providers. Over and above this, EU-licensed internet casinos will also be made subject to unrealistically high taxation of stakes compared to national monopoly operators. In the opinion of legal experts, such unequal treatment is incompatible with both EU legislation and constitutional law.
Regulation of the online gaming market is essential
In Germany, the State Treaty on gambling that came into force on 1 January 2008 similarly reinforced the German states’ monopoly of sports betting. The German treaty has led to a number of court cases focusing on its validity, which is interpreted very differently by
individual German courts. In January 2008, the European Commission initiated infringement proceedings against Germany due to the fact that the treaty imposes inadmissible restrictions on the cross-border provision of services. The German authorities are nevertheless attempting to enforce the internet ban by means of injunctions and enforcement proceedings against bwin and other private operators. The German Federal Supreme Court is expected to provide further clarification of the legal situation in the civil
proceedings instituted against bwin International Ltd. by Westdeutsche Lotterie GmbH & Co OHG (“Westlotto”). Westlotto has applied for a cease and desist judgement against bwin International Ltd., seeking to prevent the company from organizing, mediating and
advertising sports betting, casino and lottery games in Germany. The courts of first and second instance found against bwin International Ltd., and the Higher Regional Court of Cologne has declared that the judgement is enforceable, although the final ruling from the Federal Supreme Court on the merits is still pending. bwin e.K., which offers the Company’s products on www.bwin.de under a licence issued by the former German Democratic Republic, is not a party to these proceedings before the Federal Supreme Court.
Despite initiatives in the European Council and the European Parliament, the regulatory environment for online gaming is not expected to be harmonized in the foreseeable future. The European Commission has emphasized several times that it does not intend to harmonize this sector in view of member states’ differing views. Instead, the European Commission is endeavouring to enforce the rights to which private operators are entitled in accordance with the EC Treaty (in particular, freedom of establishment and freedom of services). To this end, since April 2006 the European Commission has initiated infringement proceedings against 10 member states due to national gaming legislation which, in the Commission’s view, is in violation of EU legislation. The proceedings against France, Hungary, Sweden, Finland, Denmark, Greece and Holland have already advanced to the second stage, at which point the member states are called upon a so-called “reasoned opinion” to amend their laws in contravention of EU legislation.
The pursuit of these infringement proceedings has recently been delayed. Nevertheless, further clarification of the legal situation can be expected soon, in view of the numerous cases submitted by national courts and pending with the European Court of Justice (ECJ).
There are currently 17 preliminary ruling procedures relating to national restrictions on cross-border gaming pending with the ECJ. The procedures were referred by courts in Portugal, Austria, Germany, France, Holland, Belgium, Sweden and Greece.
On 14 October 2008, the advocate-general submitted his final pleading in the Portuguese preliminary ruling procedure (C 42-07), in which bwin is involved as a party to the initial proceedings. In these proceedings, the ECJ set out to examine the admissibility of the
Portuguese sports betting and lottery monopoly, and is expected to pass judgement in the first half of 2009.
In the United States, there is growing support for the regulation of online gaming in view of the fact that the general ban imposed by the “Safe Port Act” resulted only in the departure of reputable operators and a growing grey and black market. The US Department of Justice has indicated its willingness to reach agreement with online gaming companies that ceased to operate in the USA in 2006 following the passing of the Unlawful Internet Gambling Enforcement Act (UIGEA).