Stanleybet Newsletter - Issue 17 | November 2010
Legal and political developments in Europe
The autumn has brought new impetus to the move towards the creation of a regulated single market in gambling.
The September 2010 European Court of Justice judgements in the Markus Stoss and Carmen Media cases have brought increased clarity and consistency to the jurisprudence. Restrictions against the free movement of betting services can only be justified for genuine public interest reasons if they are applied consistently and systematically. The channelling of gambling towards monopolies can only be permitted if accompanied by genuine and effective action to prevent gambling-related harm which is supported by specific data provided by the Member State demonstrating that the monopoly functions strictly and solely towards that purpose.
Member states, therefore, looking towards this monopolistic abuse as a means to feed the budget deficit will need to look to other means to generate revenue.
At the same time, with three additional member states (Spain, Denmark, and possibly the Netherlands) soon to allow some form of regulated private gaming industry, it is clear that more and more countries have realised the benefits to be gained for both consumers and the budget balance.
However, there is some way to go. Commissioner Barnier's repeated commitment to a Green Paper on online gambling services is to be welcomed as a major step towards an impartial examination of the opportunities and challenges of the sector. However, the step is incomplete: it confines itself (as do many of the reforms of national gambling laws) to online gambling.
This flies in the face of both logic and of the reasoning of the European Court of Justice. If restrictions to the internal market principles can only be justified by public interest objectives that are consistently and systematically applied, then what justification is there in moving towards an opening of only one sector of the industry, namely online? This seems to leave the offline sports betting sector in particular aside. Thus, despite the Court having itself declined to ascribe the same risk profile as for the online sector, offline sports betting remains still subject to the vagaries of national vested interests and prejudices. This is nowhere more evident than in France where although the European Commission closed the infringements procedure against restrictions in the provision of online gambling, as France has now introduced a licensing system, it must be noted that this market is a far cry from being compliant as it still maintains an offline sports betting monopoly.
Only a fundamental and impartial examination of all gambling will bring Europe a high quality, safe and regulated gambling industry. Excluding the offline sports betting sector from any reform process discriminates against an industry where the customer is protected by direct interface with an operator and which creates both jobs and revenue - an important consideration in these straitened times.
John Whittaker , CEO, Stanleybet
Green Paper on gambling
Commissioner Michel Barnier (Internal Market & Services) has repeatedly asserted his intention to issue a Green Paper by the end of 2010. In his speech during a Belgian EU Presidency conference on gambling on 12 October 2010 he stated that online gambling is now a reality in Europe and it is time to recognize it. In an important departure in thinking embodied in the Schaldemose report (which only recognized legal and illegal operations), he made a clear distinction between an illegal offer (85% of 15,000 sites operated without a licence in 2006) and a "grey" offer. He also recognized the possibility of online gambling contributing to the public interest. The Green Paper will be presented utilizing a consultation of interested stakeholders.
Infringements regarding online gambling in Italy and France closed
The Commission has closed two infringement proceedings against Italy and one proceeding against France concerning online gambling legislation.
The Commission had previously found that Italy's restrictions on foreign operators were disproportionate and had started legal proceedings against Italy for breaching EU rules on the freedom to provide services, but following Italian amendments to its online gambling legislation, the Commission closed the cases.
Regarding France, the proceedings opened in 2006 regarding France’s online restrictions were closed following the adoption of the new French law on online gambling.
Responsible Gaming Day: call for harmonization rules in Europe
On 13 October 2010, a conference was organized in the European Parliament within the framework of a “Responsible Gaming Day”. During the opening speech Timothy Kirkhope MEP (UK, ECR) stated “In my speech to the European Parliament in February this year, I argued that there was no reason why private gambling providers, who operate under very high levels of regulatory protection in one EU Member State, should not be allowed to operate in others. I believe that there is no reason why a tightly regulated, but open market, will not provide an equivalent, if not a higher, level of protection to citizens as any tightly controlled state monopoly.”
EU Council of Ministers
Progress report by the Spanish EU Presidency
The Council Working Group “Establishments and Services” met several times under the chairmanship of the Spanish EU Presidency. The definition of illegal gambling was discussed and finally approved during the last meeting on 25 May 2010. Illegal gambling was defined as follows: "gambling in which operators do not comply with the national law of the country where services are offered, provided those national laws are in compliance with EU Treaty principles".
Belgian Presidency work
The Belgian EU Presidency held a conference on 12 October “The role of authorities in regulating gambling” with the aim of advancing the debate on the role of the regulatory authorities in the prevention of the spread of illegal gaming and on the social problems that gambling cause Commissioner Barnier, who participated at the event, stated: “We must look again at the reasons which lead us to regulate gambling, and perhaps rethink the way - more or less effectively, more or less coherently – in which we are dealing with the matter. We cannot escape this debate: this is why it must take place; this is why I wanted it. Soon I will submit to the College a text, which without taboos, poses a series of questions: I want to deal with the whole topic.”
The Belgian Presidency, in collaboration with the Council Working Group on Gambling, is working on a document on gambling which it aims to release once the Green Paper is made public.
The Belgian Presidency organized on 16 November a conference on lotteries and charitable organisations.
Informal meeting of Sport Ministers
On 16 September, the European Council renamed the Council of Education, Youth and Culture as the Council of Education, Youth, Culture and Sport - including Audiovisual Affairs. The insertion of Sport in the name of the Council confirms the intention to make full use of this new EU competence.
Court of Justice of the European Union
Latest developments and reactions
On 3 June, the judgments were rendered in Cases regarding Betfair (C-203/08) and Ladbrokes(C-258/08) in the Netherlands.
The judgments underlined that a Member State can prohibit the operation of games of chance on the internet.
“This prohibition may, on account of the specific features associated with the provision of games of chance on the internet, be regarded as justified by the objective of combating fraud and crime”. In addition the Court restated what was said in the Santa Casa (C- 42/07) case: “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”.
However, following these judgments, gaming operators and associations welcomed the fact that the Court confirmed that if a Member State wants to prohibit or to channel gambling through a single operator it has to comply with strict conditions. The ECJ held that “the principles of equal treatment and the consequent obligation of transparency are applicable […] in the field of games of chance”.
Gaming operators have also called for a political initiative at the European level to avoid various national interpretations of the ECJ preliminary rulings.
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 validity of the Austrian gambling regulation to EU law. The Austrian regulation imposed on holders of casino licenses the obligation to have their headquarters based in Austria, the purpose of which was 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 43 of the Treaty must be interpreted as precluding legislation from a member state under which games of chance may be operated in gaming establishments only by operators whose seat is in the territory of that Member State.
Last steps towards gaming reforms
Following the vote by the Belgian Parliament at the end of 2009, the draft law on games of chance and its implementation decrees were submitted to ministerial cabinets for examination and approval.
Following lengthy discussions, 7 out of 9 decrees have been agreed upon; the remaining 2 are still awaiting a compromise at Ministerial level. In accordance with the procedure, the decrees have been sent to the Belgian Council of State and 3 were notified to the European Commission. The standstill period of 3 months expired without the Commission receiving or issuing any detailed opinion.
The decrees must also obtain the final approval of the Council of State. However, as the Belgian government is currently in “caretaker mode”, the date for such a meeting is still to be determined. The draft law should enter into force on 1 January 2011.
In the meanwhile, Belgian regions have started to change the rates of taxation on both offline and online betting (which is of regional competence). The Wallonia region is setting online betting taxation at 11% of the gross amount waged while the taxation for offline is 32% of the gross margin. The Brussels region has set the taxation for online betting at 15% on the gross margin which will be the same as for offline betting. The Flanders region sets the taxation rate for online gambling at 11% on the gross margin while the taxation for the offline is 15% of the gross margin.
Three cases are pending before the Belgian Constitutional Court asking for the annulment of certain articles of the draft Gambling law. Two cases also sought the injunctive suspension of certain articles but the Court rejected these applications in July.
Football federation launches warning system on irregular betting
The Czech Republic's football federation has joined forces with the country's five major betting operators in a bid to tackle suspicious betting on football matches. Operators are required to inform federation officials if they detect any irregular betting patterns, thereby helping to prevent match fixing.
Postponement of gambling act criticized
The different level of taxation foreseen by the future Danish gambling law is already posing some questions. The draft law will impose a lower taxation on internet gambling operators compared to the counterparts offline. The Danish slot machine industry introduced a complaint to the European Commission. Following the Danish government’s formal reply, the European Commission has 20 working days to take a decision. The Danish regulator is still officially seeking to issue new sports betting and online casino licences starting from 1 January 2011.
Online gambling law promulgated
The law was published in the Official Journal on 13 May, along with related applicative decrees covering the new regulator “Arjel” and sports betting and operators' licensing requirements.
Key points of the new gambling law include:
- Gaming operators must apply for a licence with “Arjel”, which will check the compliance of their business with the regulatory provisions.
- Under-age persons will not be eligible to use online gaming services.
- Fiscal rules on online games are expected to be brought into line with those on non-virtual gambling, such as casinos and horse racing. Part of the takings will go towards anti-addiction campaigns.
- Illegal sites as well as any money transactions between French banks and the sites will be blocked.
The regulation has not gone without legal challenge, with a number of private operators, including Stanleybet lodging complaints regarding the new law and its implementation.
As a result of the growing discontent, the French Competition Authority has announced an inquiry into the workings of the new act.
Following the entry into force of the gambling law there were many expectations on the development of the market, which were not met. In fact the total turnover produced during a four month activity- span was of around €1 billion. Some operators have foregone entry to the French market. Such operators include Ladbrokes which abandoned its plans to open online betting operations because the taxation imposed could made profitability impossible. William Hill also was forced out of the market because of the low level of anticipated net revenues.
Liberalised German sports betting market in 2010?
Following a request for an opinion from the Prime Ministers Conference of the 16 federal states, the German Olympic Sports Federation has recommended that sports betting be legalised and regulated under future legislation. Germany’s major football league, the Bundesliga, has also called for an end to the German Interstate Gambling Treaty.
The Treaty enacted on January 1, 2008 introduces a ban on online gaming and betting (except for horse races) in Germany. The current legislation is set to expire on 1 January 2012 and its renewal is conditional upon 13 of the 16 German states supporting the law.
. Considering that at least 6 states now oppose the law (Bavaria, Hesse, Hambourg, Saxony, Schleswing-Holstein, Lower Saxony), there is a need to rethink the structure of the market.
Opening of the Greek market
The Greek government is currently re-examining how to regulate the gambling market.
Within this context and after 11 years, technical electronic gambling machines - “slot machines” or “froutakia”, as they are known in Greece - are being re-introduced to the Greek market with a new legal framework; furthermore, a discussion regarding the regulation of online gambling has commenced although no willingness is apparent to regulate offline sports betting.
These discussions also include the potential to reintroduce scratch-card licenses, while the government is examining the possibility of extending OPAP S.A.’s exclusive right to offer offline sports betting and lottery services.
The extension of the OPAP monopoly for an additional ten years, proposed as an alternative to plans for the total privatisation of the Organisation, is a discussion which has been on-going some months and is expected to bring significant revenues to State funds. Already, in a legislative act brought to the Parliament in June 2010, the government has committed, that it will raise €700 million from gambling within 2011. This clearly shows that the Greek government now treats gambling as an economic activity.
Reactions have also emerged from professionals already active in the business such as casino operators and OPAP agents. Much criticism has emerged in the press from the fact that it seems that OPAP itself is drafting the legislation in question, with many sides claiming that there is a clear conflict of interest.
A public consultation was launched at the end of August involving all the interested stakeholders.
At a hearing organized on 21 September 2010 the main guidelines for the gambling market regulation and the results of public consultations were presented by Finance Minister G. Papakonstantinou. It is expected that the draft bill could pass in early 2011. However, the final legal framework of the gambling regulation has not been decided.
Irish Bookies Fight 80 Year Old Gambling Law
The Irish Bookmakers Association (IBA) is taking issue with an 80-year old law, the Betting Act of 1931, which regulates opening hours. The law allows betting shops to trade until 10pm between March and August, but ends trading after 6:30pm during the other months.
The IBA is not currently seeking a uniform year-round policy, but rather merely wishes to open shops until 10pm for a minimum of 3 nights a week. Meanwhile, online sportsbooks in Ireland will remain available to gamblers 24 hours per day, 7 days a week.
Unique text on games coming soon
Finance Undersecretary Alberto Giorgetti announced at the end of September his intention to come up with a “unique text” on games, paying particular attention to ethics and to the world of horse racing, currently in crisis in Italy.
Two local Italian tribunals, from Prato and Santa Maria Capua Vetere have submitted requests for a preliminary ruling to the ECJ questioning the legitimacy of the Bersani system in Italy and asking whether it is compatible with EU law.
European Commission criticises the Polish draft law
The draft gambling law seeks to ban all forms of gambling outside casinos within the country. This includes a ban on gambling-related advertising. The draft legislation would also ban all online gambling except for sports betting. Online operators would be required to be both established and to locate their data servers in Poland.
The European Commission issued a detailed opinion criticising the draft law. Concerns were also raised by the UK, Malta and the EGBA concerning the requirements that would apply to operators in order to operate in the country.
Towards an online regulation by the end of the year?
Spain’s Navarra has been the latest autonomous community to seek to regulate sports betting after the Counsel of Navarra issued a decree on 21 April to the Community’s Gaming Committee. The decree aims at authorising sports betting in betting shops, bars & cafes, gaming salons and bingo halls.
In September the Spanish Cabinet announced plans to license and regulate online gambling, making clear that regional governments, which currently regulate most forms of gambling, will be the main beneficiaries of tax revenues.
However, disputes between the national and regional authorities have emerged. Madrid’s director of gaming and taxation feels that regional authorities have been neglected. The gambling regulation is therefore expected to be issued next year.
Online gambling liberalized soon
The newly elected Dutch government is currently looking to open the online betting market, by allowing private operators to enter the Dutch market. This move would increase the offer for consumers as well as increase the government income. The system which will regulate the liberalization is yet to be decided.
The new coalition: reorganization of public services
For the gambling sector, the new UK government brings fresh faces but relatively little in terms of change of direction. While the coalition placed Liberal Democrats ministers in almost every department, the key posts for the gambling industry are all Conservatives. Jeremy Hunt becomes the Culture Secretary, also taking on responsibility for the Olympics – previously a separate ministerial post.
In its plans to reorganize the public services in order to cut public spending, the DCMS, on 14 October 2010, confirmed that the National Lottery Commission will be merged with the Gambling Commission.
The Government is also seeking to change the arrangements for determining the Horserace Betting Levy.