Licensing and Legal Overview

As principal party in the landmark Gambelli (C-243/01), Placanica (C-338/04) and Costa and Cifone (C-72/10/C-77/10) Court of Justice of the European Union (CJEU) rulings, Stanleybet has taken the lead in the legal battle against betting restrictions that are incompatible with the law of the European Union.

Stanleybet is also the principal party in the Greek case (C-186/11) presently pending before the CJEU. The Advocate General’s opinion is expected on 20 September 2012.

Stanleybet's right to provide sports betting services across Europe is enshrined in the Lisbon Treaty. Articles 49 and 56 of the EU Treaty are the two key legal benchmarks in that respect.

Article 56 states "Within the framework of the provisions set out, restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of member states who are established in a State of the Community other than that of the person for whom the services are intended."

Article 56 is applicable to companies of one Member State providing or receiving a service in another Member State and can be invoked by both the provider and the receiver of services. Stanleybet provides a cross-border service in a number of Member States.

Article 56 expressly prohibits any discrimination based upon nationality. As a consequence, any national measure that explicitly or effectively discriminates against a foreign service provider must be examined as regards to its conformity with EU law.

Article 49 states "within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State. Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 54, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital".

Article 49 guarantees the rights of individuals and companies from other Member States to exercise their profession on a permanent basis in another Member State in the same manner as the Member State's own nationals. Moreover non-discriminating restrictions concerning the access of nationals of a Member State to the market of another Member State are prohibited, including restrictions in the setting-up of agencies, branches or subsidiaries and all restrictions limiting access to certain professions.

As gambling and lotteries are excluded from the Services Directive 2006/123/EC, there have been a growing number of cases in the Court of Justice of the European Union on the interpretation of Articles 49 & 56 of the TFEU which apply directly as primary law of the EU to the sports betting sector.

In the CJEU Case law, a common formula has been developed for the analysis of the EU law compatibility of national measures. Any objective justification of the restriction of fundamental freedoms of the EU treaty must satisfy a cumulative four-part test: (i) the measure must not be discriminatory (ii) the measure must meet an appropriate overriding public interest objective (iii) the measure must be suitable for securing the achievement of the objectives (iv) the measure must not go beyond what is necessary in order to achieve them.

The Court of Justice of the European Union (CJEU) has confirmed that any restrictions which seek to protect general-interest objectives, such as the protection of consumers, must be 'consistent and systematic' in how they seek to limit activities. Therefore, a member state cannot invoke the need to restrict citizens' access to gambling services if at the same time it encourages them to participate in state games of chance or betting offered by national operators or a monopoly.

On 6 November 2003, the Court of Justice of the European Union (CJEU) released its long awaited judgment in Case C-243/01 Gambelli. The judgment, which upholds the opinion submitted by Advocate General Alber on 13 March 2003, departed dramatically from the established restrictive history within the European Union on gaming and betting services, and has had far-reaching consequences for betting in the EU.

The CJEU held that the Italian legislation - which punishes, as a criminal offence, all collection, acceptance, booking and forwarding of sports bet proposals within or from Italy, except for holders of a licence or authorisation issued by the authorities - is contrary to Articles 43 and 49 of the EC Treaty.

The Gambelli case was referred to the CJEU by an Italian court following a criminal action brought against a number of agents affiliated to Stanleybet. The Court stated that "where a company established in a Member State (such as Stanley) pursues the activity of collecting bets through the intermediary of an organisation of agencies established in another Member State (such as the defendants in the main proceedings), any restrictions on the activities of those agencies constitute obstacles to the freedom of establishment" (C-243/01 Gambelli paragraph 46).

The Court added that "a prohibition, enforced by criminal penalties, on participating in betting games organised in Member States other than in the country where the bettor is established constitutes a restriction on the freedom to provide services" (C-243/01 Gambelli paragraph 57).

The Gambelli decision made it clear that restricting gambling activities to state-licensed undertakings is unlawful if such a decision is based on purely financial grounds. Restrictions can only be justified on public policy grounds if there is an overriding public interest: any restrictions need to be justified, proportionate and applied in a consistent manner.

On 6 March 2007, the Court of Justice of the European Union (CJEU) found in favour of a Stanleybet agent who had been prosecuted by Italian authorities for processing bet proposals in Italy.

The judgment reinforced the CJEU ‘Gambelli' ruling of November 2003 which clearly recognised the right of sports betting businesses legally established in one Member State to offer those services in another Member State.

The "Placanica" ruling stated that legislation on sports betting must not contain provisions which, in its words, "constitute a restriction on the freedom of establishment and the freedom to provide services, provided for in Articles 43 EC and Articles 49 EC respectively" (C-338/04 Placanica judgment paragraph 1).

The Placanica ruling yet again validates what Stanleybet has said all along: consumers in Europe deserve, and are legally entitled under Articles 49 and 56 of the Treaty to, a choice in where they place bets. In addition, it clearly demonstrates that Stanleybet's operations are carried out using its rights as set out in the TFEU.

On 16 February 2012 the CJEU released its judgment on the Costa and Cifone cases (C-72/10 and C-77/10) stating that the 2006 Italian licencing system (i.e. the Bersani tenders) does not comply with the EU law as a number of its provisions breach Art. 49 and Art. 56 of the TFEU, and are contrary to the Court’s settled case law.

The main questions referred for a preliminary ruling are two: one seeks clarification on whether the new Bersani tenders protect the market position of the operators which previously obtained a licence under the 1999 tenders (from which Stanleybet was unlawfully excluded); the second question inquires whether the new restrictions introduced by the Bersani tenders (including the fact that AAMS cannot grant a licence to gambling operators operating by means of data transmission sites located outside the Italian territory) are compatible with EU law;

The Court held that “public authorities which grant betting and gaming licences have a duty to comply with the fundamental rules of the Treaties and, in particular, with Art. 43 EC and Art. 49 EC, principles of equal treatment and of non-discrimination on the grounds of nationality and the consequent obligation of transparency” (C-72/10 C-77/10 Costa and Cifone paragraph 54);

Once again the CJEU expressly recognized that Stanleybet has been discriminated by the Italian system which breaches EU law by protecting the market positions of pre-existing licensed operators. The system is considered unlawful also because it imposes restrictions by excluding a category of operators which operates according to a specific business model, the DTC model, which the Court acknowledged to be legitimate in three landmark judgments (C-243/01 Gambelli, C-338/04, C-359/04 and C-360/04 Placanica et al. and C-72/10 C-77/10 Costa and Cifone). The CJEU also stated that operators which were excluded, in breach of EU law, from previous tendering procedures, and which tried to participate to the new tenders but were again discriminated, should not be subject to “penalties for engaging in the organised activity of collecting bets without a licence or police authorization” (C-72/10 C-77/10 Costa and Cifone judgment paragraph 3).

The CJEU Costa and Cifone ruling can only be applied to Stanleybet as Stanley is the only operator being able to demonstrate that it was actually discriminated and prevented to apply for an operating licence both in 1999 and 2006 tenders in Italy. This was confirmed by a recent ruling of the Italian Supreme Court (ruling n. 305/2012 of the Supreme Criminal Court).

CJEU

On 13 September 2007, the CJEU again condemned the restrictive Italian practices in the betting sector with Case C-260/04. The CJEU upheld the European Commission's view of the situation by condemning a 1999 Italian ministerial decree which, by renewing a number of licenses without a tendering procedure, infringed the general principle of transparency and advertising of concessions for public services. This ruling has important implications for European national betting systems because it reiterates the need for national regulatory frameworks to be fully compliant with EU law.

On 8 September 2009, the CJEU issued its ruling on the case involving bwin and the Portuguese football league versus the Portuguese monopolist Santa Casa da Misericórdia de Lisboa (Case C-42/07 Santa Casa). In this ruling the CJEU upheld the right of a very restrictive non-profit state monopoly to maintain its monopolistic status online. This case has been a clear application of the principles outlined in Gambelli and Placanica. However this application can only be considered strictly within the Portuguese gaming model with restricted offers and purely non-profit purposes. It cannot be applied under any circumstances to other non EU-compliant restrictive markets in EU member states like Greece, for instance, where the monopoly is held by OPAP, a private profit-making company listed in the Athens stock exchange with overseas investors and in which the Greek government owns only a third (34%) of the company's shares. However, since January 2012 the Greek government officially maintains only 5% of total OPAP shares with the rest being transferred to a special Fund to be sold to private investors.

On 8 September 2010, the Court ruled on the German joined cases C-316/07, C-358/07, C-359/07, C-360/07, C-409/07 and C-410/07 Markus Stoß and Others v Wetteraukreis, Kulpa Automatenservice Asperg GmbH and Others v Land Baden-Württemberg, and in Case C-46/08 Carmen Media Group Ltd v Land Schleswig Holstein and Others. It stated that the monopoly exercised by most German regional governments over lotteries and sports betting (excluding horse racing) could not be justified under single-market rules , as the German rules do not limit games of chance in a consistent and systematic manner. The Court reached this conclusion based on the inconsistent nature of the German legal framework on gambling that maintains an offline sports betting monopoly while allowing for the expansion of gaming machines – deemed as more addictive than sports betting – and for the advertisement of lottery products.

On 9 September 2010 in the Engelmann case (C-64/08), the Court examined the compatibility of the Austrian gambling regulation with EU law. The Austrian regulation imposed on holders of casino licences the obligation to have their headquarters based in Austria, the purpose of which described as being to prevent any operators from carrying out their activity in a criminal and fraudulent way. The Court ruled that the categorical exclusion of the operators whose seat is in another Member State was disproportionate, as it went beyond what was necessary to combat crime. Thus, Article 49 of the TFEU must be interpreted as precluding legislation from a member state under which games of chance may only be operated in gaming establishments by operators whose seat is in the territory of that Member State.

On 15 September 2011 the Court ruled on the Dickinger and Omer case (C- 347/09). It stated that a monopoly can be justified if it is consistent with the objective of fighting crime and reducing the opportunities for gambling. It also stated that only advertising which is moderate and strictly limited to what is necessary to channel consumers towards controlled gaming network is permissible. An expansionist commercial policy whose aim is to expand the overall market for gaming activities is not consistent with the objective of fighting crime and fraud.

European Free Trade Association (EFTA) Court

On 30 May 2007, in a verdict that follows on from both the earlier EFTA Court decision on the proposed Norwegian slot machines monopoly and the CJEU's ruling on Placanica, the Court upheld the right of European Economic Area (EEA) member states to draw up their own national legislation and restrictions on gambling services. According to the Court's Advisory Opinion, state gambling monopolies which restrict economic freedoms under the EEA Treaty are justifiable only on the condition that they "must pursue legitimate aims such as fighting gambling addiction and maintaining public order"( E-3/06 Ladbrokes Ldt. paragraph 63).

If a Member State wishes to uphold a monopoly on these grounds it must be able to demonstrate that the monopoly, as opposed to a licensing system, will "provide for a lower level of gambling addiction in society than would be the case without restrictions on free movement in relation to gambling services" E-3/06, Ladbrokes Ldt. Paragraph 45) and "ascertain that there are genuine risks arising from or connected to the different games of chance" (E-3/06, Ladbrokes Ldt. Paragraph 57).

Drawing on the CJEU's Gambelli verdict, the EFTA Court agreed that monopolies cannot be justified purely on other social grounds such as securing funds for social or charitable causes or, in the specific case of horseracing, funding agriculture and horse breeding.

Recent years have been marked by a number of important legal developments in the European sports betting sector. Both European and national courts have repeatedly stressed that sports betting is a service. National restrictions on operators can only be justified if they pursue a genuine public interest and if they are proportionate and non-discriminatory.

Despite positive developments, a number of Member States continue to maintain restrictions which are clearly incompatible with the provisions of the EU Treaty. The Commission has investigated a number of these cases and has warned of the incompatibility. However, the situation has still not been rectified.

On 24 March 2011 the European Commission adopted a communication entitled “Green Paper on online gambling in the Internal Market” (COM(2011) 128 final) with the aim of collecting information regarding online gambling related issues. In response to the consultation period the Commission received 249 answers. Stanleybet welcomed the Green Paper and submitted its contribution to the process which can be found here. However, we maintain that as the Green Paper does not address at all the offline distribution channel, the outcome of this process seriously risks presenting a partial and incomplete picture of the EU gambling market with policy proposals that may cause further legal distortions instead of offering solutions.

The European Parliament IMCO Committee produced an own initiative report drafted by Juergen Creutzmann MEP (ALDE, Germany). This was adopted on 15 November 2011 by the EP Plenary. In relation to the Internal Market rules the report called on the Commission to “continue its investigation of the possible inconsistencies of Member States gambling legislation (offline and online) with the TFEU and – if necessary – to pursue those infringement proceedings that have been pending since 2008 in order to ensure such consistency” (para 20).

We now wait for the Commission Communication for an Action Plan on online gambling scheduled for September 2012. The Communication should provide an evaluation of the results of the Green Paper consultation; It should also identify the key challenges posed by the coexistence of different national regulatory models within the Internal Market, it should provide and overview of a number initiatives that could be taken at EU and national level in the filed of gambling and it should deal with the issue of enforcement and the pending infringement cases at the Commission.